An infusion of more than $10 billion in federal funds is spurring entrepreneurship and small business growth nationwide. The U.S. Treasury Department program, the External LinkState Small Business Credit Initiative (SSBCI), gives banks and CDFIs a powerful new tool to fund business growth in the Tenth District. SSBCI 2.0, as this new program is called, is a continuation of the original SSBCI program launched in 2010 during the Obama administration.
Bankers and community development financial institutions (CDFIs) can use SSBCI funds for potentially challenging loans, such as those without cash flow requirements, or with limited collateral or lower credit scores. An added benefit for states is that the funds continue to revolve as they are repaid. Funds from the first iteration of SSBCI are still circulating and having an economic impact in communities.
“This is an historic investment in entrepreneurship, small business growth, and innovation through the American Rescue Plan that will help reduce barriers to capital access for traditionally underserved communities,” said Secretary of the Treasury Janet L. Yellen. “These SSBCI funds will promote equitable economic growth across the country.”
Examples from two states in the seven-state Tenth District show how the funds have already made an impact on local businesses, in this case both rural, that otherwise would have had difficulty obtaining the necessary funding to grow their businesses.
Rural Colorado builder receives loan through bank, SSBCI funding
Located in rural Colorado, Fading West Homes manufactures modular homes in the state’s Arkansas River Valley. They were ready to significantly expand their business but needed new funding alternatives from their banker and state partners to make it a reality.
Joe Smith is mountain regional president for Collegiate Peaks Bank, Salida, Colorado, a division of Glacier Bank. He said, “When our existing customer, Fading West Homes, was looking for an expanded operating line of credit to increase their workforce and hire a second shift, we knew we needed to get creative. Fading West Homes is a new company in their growth phase, with limited additional collateral to pledge to the bank.”
Smith said that because the Colorado Housing Finance Authority (CHFA) had existing relationships and commitments to housing, it made sense to seek funds from them and their Cash Collateral Support Program. “We were able to work with CHFA, the Office of Economic Development and International Trade (OEDIT), and SSBCI to secure a sufficient cash collateral pledge that Collegiate Peaks was able to facilitate the $2.5 million loan request for Fading West Homes. This allowed them to continue their workforce expansion.”
The SSBCI program is a tool to expand access to capital for businesses owned by socially and economically disadvantaged individuals (SEDI). Jeff Kraft, deputy director for OEDIT and director of their business funding and incentives, said entrepreneurs in underserved communities face barriers in obtaining access to capital. “Due to the historic disadvantages rural communities have experienced, Fading West Homes qualifies under SSBCI rules as a SEDI business. Providing the funding needed demonstrates Colorado’s commitment to supporting underserved businesses.”
In a External Linknews release, Colorado Gov. Jared Polis said, “This exciting federal grant creates and supports over 11,000 good-paying jobs for Coloradans and builds upon our work supporting small businesses and entrepreneurs, saving people money, and making sure Colorado remains the best place to live, work, and do business.”
Nebraska ag tech firm benefits from SSBCI funding
RealmFive, an agricultural technology firm that assists farmers and ranchers, is based in Lincoln, Nebraska. It also needed a loan to grow the business.
As a result of SSBCI funding, the Nebraska Enterprise Fund (NEF), a statewide community development financial institution, was able to provide a $250,000 loan. Invest Nebraska, a nonprofit investment program also provided a $250,000 private matching loan for RealmFive to grow its agricultural impact.
NEF received $10.5 million from the state for SSBCI funding to support businesses across Nebraska, growing and expanding their reach. Jim Reiff, NEF executive director, said this is the first loan from NEF for SSBCI 2.0 (so called to distinguish it from the 2010 program) and noted that it offers many opportunities to participate with banks.
Treasury Department announces funding amounts for state programs
SSBCI funding is expected to catalyze up to $10 of private investment for every $1 of SSBCI capital funding, amplifying the effects of this funding and providing small business owners with the resources they need to sustainably grow and thrive.
The U.S. Treasury Department has announced funds available for state initiatives. What follows are the dollar amounts and programs in the seven states in the Tenth District. External LinkThis downloadable chart shows SSBCI capital programs and contacts for the seven states, with links.
- Colorado, approved for up to $104.7 million, will operate three programs, including a venture capital program, to which it has allocated nearly $60 million. The program expects to invest in two venture capital funds per year for three years to build a diverse seed-stage portfolio of small businesses in need of capital. Colorado has also allocated $35 million to an existing cash collateral support program that enables small businesses and non-profit organizations to secure credit by pledging a cash deposit as collateral. In addition, Colorado has set aside $10 million for a loan program intended to help Main Street businesses recover from the pandemic.
- Kansas, approved for up to $69.59 million, will operate a loan participation program, the GROWKS Loan Fund, and an equity program, the GROWKS Angel Capital Support Program, with over 80% of its funds. These programs will expand access to capital for underserved communities by providing companion loans and equity investments with varying levels of SSBCI support. Kansas estimates that approximately 40% of businesses supported will be women-owned and 20% will be minority-owned small businesses.
- Missouri, approved for up to $94.8 million, will operate a venture capital program, IDEA Fund, managed by the Missouri Technology Corporation. The program provides equity or equity-like co-investment (convertible notes) alongside primarily angel investors or venture capital funds. The IDEA Fund targets companies based on their stage of development: pre-seed companies, seed-stage companies, and venture-stage companies with an established private venture capital fund identified as a lead investor.
- Nebraska, approved for up to $64 million, will operate two programs: a loan participation program (LPP) and a venture capital program, each allocated $32 million. The LPP will provide companion loans for up to 50% of the principal loan amount through the Nebraska Growth Loan Fund. The venture capital program will provide direct investments through seed and Series A investment rounds. The program is a direct investment model with a focus on underserved small businesses. The $32 million venture capital program will support companies through the Nebraska Seed and Development Fund.
- New Mexico, approved for up to $74.4 million, will operate two programs: a collateral support program and an equity capital program. New Mexico allocated over $65 million to a new equity/venture capital program designed to provide equity support to small businesses by committing capital to private venture capital funds, including those targeting early-stage companies.
- Oklahoma, approved for up to $81.6 million, will operate two programs through the Oklahoma Center for the Advancement of Science and Technology: a loan participation program and an equity/venture capital program. Oklahoma allocated $32.7 million to the Oklahoma Business Lending Partnerships program which will provide subordinate companion loans originated by partners and CDFIs that will accompany senior loans originated by other financial institutions.
- Wyoming, approved for up to $58.4 million, will operate two equity/venture capital programs. The funds program, allocated $23.4 million, will provide limited partnership investments in Wyoming-based seed/early-stage venture capital funds. The direct program, allocated $35 million, will provide equity co-investments in Series A or growth stage technology companies in the state. Both programs will provide access for venture capital investments for in-state entrepreneurs.
Find more information about the SSBCI 2.0 at External LinkState Small Business Credit Initiative (SSBCI) | U.S. Department of the Treasury
Recently released Small Business Credit Survey – External Link2023 Report on Employer Firms: Findings from the 2022 Small Business Credit Survey (fedsmallbusiness.org)