Government Initiatives for Small Business Credit: The State Small Business Credit Initiative

Since the onset of the pandemic, the US government has spent more than $1T on small businesses, keeping many afloat in unpredictable times. However, the funds weren’t distributed evenly. For example, Black-owned companies received just 1.9 percent of Paycheck Protection Program loans during the pandemic, while white-owned businesses received 83 percent, reported Business Of Business. Acknowledging that non-white companies have difficulty getting funding, the Treasury Department has announced $10 billion in funding using a familiar credit initiative for small businesses. The State Small Business Credit Initiative (SSBCI) was first implemented during the Obama Administration as a response to the 2008-2009 financial crisis. As we emerge from the COVID-induced recession, this program is back. 

In short, the State Small Business Credit Initiative allocates federal funds to states that provide loans and capital to small businesses.  

The most recent version provides $10 billion earmarked for small businesses. Over a third of these funds are specifically for socially and economically disadvantaged individuals, tribal governments, and technical assistance for micro-businesses. 

Are You Eligible? 

According to the Treasury, the federal government will use the funds to back investing and lending activities, with $3.5B allocated explicitly in these buckets: 

  • $500m: Micro-businesses (fewer than 10 employees) 
  • $2.5B: Total state funds for businesses owned by the socially and economically disadvantaged 
  • $500m: Technical assistance 

States will receive funds based on a formula that accounts for hardships (e.g., job losses vs. national average). They set specific programs — explained in more detail below — that best target their respective locales. 

A significant obstacle for the SSBCI is letting people know they are eligible and the deadlines for applications. So, here’s an application overview and the US Treasury website with all the latest information about the program. 

SSBCI Programs 

The programs available under SSBCI include: 

  • Venture Capital Programs: Public-private partnerships can be set up for equity investing or investment in venture capital funds. These focus on providing capital to underserved startups and democratizing venture capital across geography and diverse founders. 
  • Loan Participation Programs: States, territories, and Tribal governments purchase an interest in the loans or lend directly alongside private lenders, providing direct financing opportunities to small businesses. 
  • Loan Guarantee Programs: States, territories, and Tribal governments use SSBCI funds as a guarantee to lenders that they will be partially repaid if the loan defaults, helping small businesses secure loans that may have otherwise been inaccessible. 
  • Collateral Support Programs: These programs set aside funds as collateral for new loans, enabling startups to borrow funds with the assistance of SSBCI capital. 
  • Capital Access Programs (CAPs): These programs provide portfolio insurance in a loan loss reserve fund which the lender and borrower contribute to, supplemented with SSBCI funds. 

The Bottom Line 

The SSBCI aims to promote equity, catalyze private investment, and fuel economic growth and good jobs. This falls directly in line with Markaaz’s mission to provide small businesses with equal access to opportunity and promoting small business growth. We have a small business initiative of our own, the Small Business Economic Development Initiative (SBEDI), which allows small businesses to receive a year-long sponsored membership with Markaaz. You can join the waitlist for the program here and learn more about how our Directory and upcoming Dashboard and Payments features are changing the game for all businesses. 

Casey Pontrelli, Content Manager             

Markaaz             

About the author: Casey Pontrelli is a multi-talented professional with a background in content creation, branding, and social media marketing. Whether writing for a newspaper, eCommerce website, B2B startup, or a marketing agency, she has taken her strong background in journalism and turned her focus to SEO and content marketing. She’s written about everything from boutiques to cars to online lending, but she’s especially passionate about supporting small businesses and giving them equal access to opportunity, which is why she’s a proud member of the Markaaz family. When she’s not writing up a storm or creating eye-catching social media graphics, Casey enjoys hanging out with her two cats, Eddy and Larry, going on long bike rides, and, predictably, reading.          

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