New Government Funding for Small Businesses

Will your small business clients have access to the first batch of funding awards through the State Small Business Credit Initiative (SSBCI)? Last month, the US Department of Treasury announced the first funding round under the new SSBCI that gives over $10 billion in funding to states, the District of Columbia, territories, and tribal governments to stimulate entrepreneurship. And that money is starting to become available.

The original SSBCI funding took place after its creation as part of the Small Business Jobs Act of 2010. The current funding is part of The American Rescue Plan Act signed in March 2021.

The $10 billion initiative includes funding for (1) lending and investment programs for current and new small businesses; (2) technical support to small businesses applying for SSBCI financing and other government small business programs. Treasury will be distributing the money to the jurisdictions which will be administering the funds through local organizations.

Lending and Investment Programs for Current and New Small Businesses

According to the SSBCI Fact Sheet, lending and investment programs include:

• Venture Capital Programs: Jurisdictions may set up public-private partnerships for equity investing or invest in venture capital funds. These investments are focused on providing capital to underserved startups and democratizing venture capital across geography and to diverse founders.
• Loan Participation Programs: In these programs, states, the District of Columbia, territories, and Tribal governments buy an interest in the loans made by lenders or lend directly alongside private lenders, providing direct lending to finance small businesses.
• Loan Guarantee Programs: States, the District of Columbia, territories, and Tribal governments use SBCI funds to provide an assurance to lenders that they will be partially repaid in the event of default, after the lender makes every reasonable effort to collect, helping small businesses secure loans that may have otherwise been inaccessible or prohibitively expensive.
• Collateral Support Programs: The programs in this model set aside funds as collateral for new loans, enabling start-ups to borrow funds to help their businesses grow with the assistance of SSBCI capital.
• Capital Access Programs (CAPs): These programs provide portfolio insurance in the form of a loan loss reserve fund into which the lender and borrower contribute, supplemented with SSBCI funds.

Of the $10 billion funds, $2.5 billion has been earmarked for businesses owned and controlled by socially and economically disadvantaged individuals (SEDI). Eligible jurisdictions have been assigned SEDI Objectives and those jurisdictions meeting those objectives will receive incentive funding. 

Getting Information About SSCBI to Your Clients

You and your clients are strongly recommended to begin learning about these new programs sooner rather than later. 

SSBCI Technical Assistance (TA) Grant Program and Accounting Professionals

SSBCI provides you an opportunity to help your small business clients with the funding they may need but it also provides some of them the opportunity to receive grants to obtain technical assistance in legal services, accounting services and financial advisory services. 

A total of $200 million in grant funding is available to very small businesses (those with fewer than 10 employees, including independent contractors and sole proprietors) and SEDI-owned businesses. The program guidelines, on page 3, provide the definition of a SEDI-owned business.

The following services, as well as those similar to them, are qualified legal, accounting, and financial advising services supplied to an eligible beneficiary under a TA Grant Program award.

Accounting Services

• Preparing audits, financial statements, or business records.
• Digitizing financial records.
• Advisory services or training regarding accounting practices, recordkeeping, or accounting software.

Financial Advisory Services

• Assisting with the establishment of banking relationships or other financial services.
• Assisting with applications for government small business programs, including preparing financial analyses.
• Identifying sources of credit, capital, grants, and other financing.
• Advising on factors that may impede access to financing for the business.
• Advising on financial management.
• Developing presentations to potential investors, financial models, and business plans.

Applications for this grant program will be through a portal that Treasury will establish.

Full guidelines for the TA Grant Program can be accessed here. 

Jurisdictions with Treasury Approved SSBCI Plans

In November 2021, Treasury published an updated preliminary allocations table showing the funding projected for each jurisdiction. In May, the agency began approving plans for states, territories, the District of Columbia, and Tribal governments. Each jurisdiction will distribute its funds through local organizations. Here are states that have currently been approved. 

• Hawaii - approved for up to $62,021,957.
• Kansas - approved for up to $69,596,847. 
• Maryland - approved for up to $198,404,958
• Michigan - approved for up to $236,990,950
• West Virginia - approved for up to $72,104,798

Treasury will continue to approve plans on a rolling basis. 

Editor's Notes:

1. We will continue to provide updates on the SSCBI, including states with approved plans, and information on the opening of the Treasury portal for TA grant applications.

2. A second round of state approvals was announced in July. Read here to find out if your state had programs approved. 

3. A third round of state approvals was announced in August. Read here to find out if your state had programs approved.