The State Small Business Credit Initiative: An Overview and State-by-State Guide

Nicole Rothstein

A recent White House report found that more Americans are starting new businesses than ever before—with 2021 seeing 20% more new businesses than any other year on record. The study also found that small businesses with fewer than 50 workers created 1.9 million jobs in the first three quarters of 2021—the highest rate of small business job creation ever recorded in a single year. 

In an effort to keep this small business boom going, the U.S. Department of Treasury (Treasury) recently announced the first recipients of the State Small Business Credit Initiative (SSBCI). The SSBCI authorizes Treasury to allocate federal funds to states, U.S. Territories, Washington, D.C., and Tribal Governments to capitalize on local small business support programs. So far, the initiative includes 18 states. Treasury will continue approving plans on a rolling basis. 

SSBCI’s background

The original SSBCI, in place from 2010 until 2017, was the Obama Administration’s response to the 2008-2009 financial crisis. This inaugural version of the SSBCI delivered around $1.5 billion to states and generated over $10 billion of investment funding into state programs supporting small businesses. It was considered a success across the aisle.

The recent impact of COVID-19 on the U.S. economy forced many small businesses around the country to close their doors. Policymakers developed the American Rescue Plan Act, which included the revival of the SSBCI. Over a third of the funding was reserved for socially and economically disadvantaged individuals, tribal governments, and technical assistance for micro businesses. When the plan was signed in March 2021, it authorized $10 billion for the SSBCI.

Gusto advocates for prioritization of underserved businesses

On June 3, 2021, Gusto sent a letter on behalf of the Small Business Relief Council (SBRC) to Treasury urging for the $10 billion in SSBCI funds to be implemented in a way that prioritizes small businesses owned by people of color, women, and those otherwise left out of the Paycheck Protection Program (PPP). SBRC and Gusto provided several recommendations to Treasury based on their collective experience working with small businesses during the COVID-19 pandemic. The goal is to ensure SSBCI funds support the ongoing recovery efforts in an equitable and inclusive manner.

SSBCI programs and intentions

As listed on Treasury’s SSBCI fact sheet, there are five types of programs that fall under the newly-revived SSBCI (also sometimes referred to as SSBCI 2.0): Venture Capital, Loan Participation, Loan Guarantee, Collateral Support, and Capital Access.

Treasury aims to address the lack of access to capital and expand opportunities for small businesses in underserved communities. Aligning with this goal, Treasury incorporated the following themes into the initiative’s guidelines:

Job creation: An increase in capital translates to small businesses being able to offer more job opportunities, while also having more funds to meet payroll and retain current employees.

Promoting equity: SSBCI 2.0 has a new allocation of $1.5 billion dedicated to traditionally underserved businesses and entrepreneurs who struggle to access capital due to racial and ethnic prejudice or cultural bias, and also directs $600 million to tribal governments.

Increased wages: Treasury actively encourages states that receive SSBCI funding to invest in small businesses that pay a living wage to their employees. 

Focus on key industries: Treasury encourages jurisdictions to target funds toward specific industries that are key to reviving the economy, such as manufacturing, logistics and supply chains, and renewable energy.

Guidelines for participation

Since the initiative is not a competitive award process, Treasury will approve states that apply and meet specific requirements.

In order for a state to be approved as an SSBCI participant, it must prove that it has delegated administrative responsibility for the program to a specific department, agency, or political subdivision of the state. A statement from the state’s governor illustrating the steps taken to appropriately delegate this responsibility must be included in the application. 

Applying states must also detail how it will use the funds to provide access to capital for small businesses in underserved communities. This information must include a means for the state to periodically assess the progress of its plans over the course of the allocation period.

More information about the specific requirements and process for states to apply can be found in Treasury’s SSBCI Capital Program Policy Guidelines.

Recipients of the new SSBCI

Treasury is rolling out approval of the new SSBCI funding in groups. In May, Treasury announced the first recipients of the new SSBCI: Hawaii, Kansas, Maryland, Michigan, and West Virginia. In July, another nine states were approved: Arizona, Connecticut, Indiana, Maine, New Hampshire, Pennsylvania, South Carolina, South Dakota, and Vermont. And in August, four states were approved: Colorado, Montana, New York, and Oregon. Below is a general overview of the plan approved for each state, including a link for more information and application details. Please continue to check back for more information as it is added.

Arizona: In order to operate three different programs focused on underserved businesses (two venture capital programs and one loan guarantee program), Arizona has been approved for $111 million in SSBCI funding. All three programs are tasked with providing financial assistance to start-ups that are working to broaden access to high-speed internet in underserved communities. Additionally, the program is designed to stimulate financing of small businesses, including through private investment.

Colorado: Approved for up to $104.7 million, Colorado will run three programs with its SSBCI funds. The largest chunk, $59.8 million, will go to Colorado’s Venture Capital Authority, which plans 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. The state’s Cash Collateral Support Program, which helps lenders provide loans to small businesses, will receive up to $34 million. The CLIMBER Loan Fund Program (short for Colorado Loans to Increase Mainstreet Business Economic Recovery) will receive up to $10 million to help small businesses recover from the pandemic. Learn more.

Connecticut: A strategic venture capital sector of the state government, Connecticut Innovations, will distribute the $119.5 million in SSBCI-approved funding for the state. With the new money, the state will launch two new funds: The Connecticut Future Fund, which will support underserved and diverse entrepreneurs in a variety of sectors, and the ClimateTech Fund, which will support early-stage businesses focused on improving the environment and addressing climate change. Learn more.

Hawaii: For a state with an economy largely dependent on tourism, Hawaii was hit hard by the pandemic. The state was approved for up to $62,021,957 through the SSBCI with an emphasis on diversifying its economy. Two-thirds of the funds will be allocated toward launching new loan participation and credit enhancement programs. A new venture capital program will target early-stage businesses with a social or environmental focus on Hawaii. This aligns with Treasury’s emphasis on renewable energy as a key industry for the American economy and with the state’s need to enhance other areas of its economy besides tourism. Learn more.

Indiana: The Indiana Economic Development Corp. announced that the state will receive a minimum of $86 million and will be eligible to receive another $13 million—for a total of $99 million over 10 years. The funds will be used to increase and expand access to capital for entrepreneurs, start-ups, and small businesses. Approximately $28 million will go toward establishing a fund for capital specifically for historically underserved entrepreneurs and small businesses. Learn more.

Kansas: With a focus on minority- and women-owned small businesses, Kansas was awarded up to $69,596,847 in SSBCI funding. According to estimates, approximately 40% of supported businesses will be female-owned and 20% will be minority-owned. In order to distribute the funding, the state created the Kansas Framework for Growth GROWKS Loan Fund and the GROWKS Equity Programs. These programs will be critical in engaging the extensive network in Kansas of over 600 community and business support partners to acquire matching capital. It is estimated that the resulting private sector investment over the course of the programs will reach $1 billion. Learn more.

Maine: A critical component of Maine’s economy, entrepreneurs and small business owners in the state will find greater access to capital and more financing options to grow and sustain their businesses thanks to the new “Grow Main” initiative through the Finance Authority of Maine (FAME). The organization is partnering with over 30 groups across the state to deploy the $62.2 million it has been approved for from the new SSBCI. The funds will be used to fund four different programs—including two venture capital programs that will focus on startups with less than ten employees. Learn more.

Maryland: SSBCI funds will focus on communities with a high concentration of small, micro, and Socially and Economically Disadvantaged Individual (SEDI) businesses. It’s anticipated that of the $198,404,958 that Maryland was approved for, 70% of new loans will be provided to minority-owned businesses and 40% to women-owned businesses. The funds will be split up into eight loan and equity investment programs through Maryland Department of Housing and Community Development, Maryland Department of Commerce, and Maryland Technology Economic Development Corporation. Learn more.

Michigan: While the first iteration of the SSBCI in Michigan focused on areas such as manufacturing, for SSBCI 2.0, the state will expand the program to reach smaller businesses disproportionately hurt by the pandemic. With approximately one-third of the $236,990,950 it was approved for, the state will operate the Michigan Business Growth Fund Collateral Support Program. The program requires partnership with private sector lenders, equity investors, and technical assistance providers.  Learn more.

Montana: To provide underserved Montanans hit hard by the pandemic (specifically rural and Native American entrepreneurs) by increasing opportunities to create new businesses and expand existing ones, Treasury has awarded Montana up to $61.3 million in SSBCI funds. The state will use the funds to operate a new program—designed after a successful program in the original iteration of the SSBCI—to increase the number of eligible CDFI and nonprofit local economic development agencies with revolving loan funds to obtain a broader outreach for targeting underserved markets. 

New Hampshire: Approved for up to $61.5 million in SSBCI funding, the state of New Hampshire will use the funds to run five different programs. Included in those programs is a loan participation program that supports community banks serving rural and other underserved communities. The state is partnering with the New Hampshire Business Finance Authority to administer the funds. 

New York: In an effort to support the small business industry—a critical component of New York’s economy hit hard by the pandemic—the state has been approved for up to $501.5 million in SSBCI funds. Empire State Development will support a number of both new and existing programs focused on capital access, loan guarantees, loan participation, collateral support, venture capital for fund managers and start-ups, and technical assistance. With a focus on minority and women-owned businesses, New York’s SSBCI funds will help reduce barriers to capital access for traditionally underserved communities and promote equitable economic growth throughout the state. Learn more.

Oregon: Treasury has approved up to $83.5 million to bolster Oregon’s existing small businesses and provide access to capital for new and growing businesses throughout the state. Business Oregon will put this funding to work through venture capital programs, loan participation programs, loan guarantee programs, collateral support programs, capital access programs, and small business technical assistance. The state has allocated $30 million to the two venture capital programs designed to make co-investments in companies alongside private investors by matching the lead investor’s structure and terms. Learn more.

Pennsylvania: The state of Pennsylvania has been approved for up to $267.8 million. The funds will be used to operate three programs, including an equity capital investments program and venture capital investments program. Funds will be distributed by the Department of Community and Economic Development to boost the success of small businesses and increase job creation opportunities across the state. Learn more.

South Carolina: A South Carolina loan participation program has been allocated $50 million and a venture capital program $51 million for a total of $101 million throughout the state in SSBCI funding. The loan participation program will work with Community Development Financial Institutions (CDFIs) to increase access to capital for underserved businesses. The venture capital program will also expand access to capital by partnering with other organizations to identify small businesses in underserved communities, specifically in rural areas. Learn more.

South Dakota: Approved for up to $60 million, South Dakota has allocated the entirety of the funds to support one loan participation program, which will administer companion loans to financing through banks and CDFIs through SDWorks. The program will use data and outreach to raise awareness and identify underserved markets in need of expanded access to capital. 

Vermont: Three new programs will receive a total of $60 million in funds through the new version of the SSBCI—including two venture capital programs and one loan participation program. The venture capital programs will provide seed money for startups, with an allocation of nearly $29 million. Another $29 million is allocated to a financial loan program operated by the Vermont Economic Development Authority (VEDA). VEDA will focus on helping businesses recover from the pandemic, providing more jobs, and diversifying the Vermont economy. Another goal for the funding is to address climate change initiatives in Vermont. Learn more.

West Virginia: The new version of SSBCI will give West Virginia $72,104,798 to increase access to capital and promote entrepreneurship. The fund will focus on expanding access to capital by providing equity investments matched with private equity from angel investors or venture capital funds. Statewide and regional nonprofits, as well as Community Development Financial Institutions (CDFIs), will partner with community banks and CDFIs to use the remaining balance of the funds for two loan programs. These loan programs will serve West Virginia businesses needing business loans. Learn more.

A final word on the SSBCI

As the United States attempts to build a more equitable economy, legislation like the SSBCI is critical. The initiative is designed to focus on minority-run small businesses and typically underserved areas. The SSBCI has the potential to make a big impact on the success and bottom-line of small businesses across the country by helping drive significant capital where it’s needed most. When small businesses flourish, the community flourishes.

Treasury will approve additional plans on a rolling basis. Continue to check back as more SSBCI recipients and additional application information are added.

Nicole Rothstein Nicole Rothstein covers a variety of topics related to finance, small business advocacy, and workforce and regional development. In addition to writing for and managing several blogs and publications, she has worked closely with federations, chambers of commerce, nonprofits, small businesses and financial institutions to create impactful content marketing strategies.
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