How the State Small Business Credit Initiative Works
Sates wishing to participate must apply for a portion of the federal funding provided through the State Small Business Credit Initiative (SSBCI). To get the funding, the states must prove that every $1 of federal money they get will result in a minimum of $10 in new private small business lending. In this way, the SSBCI hopes to generate at least $15 billion in new private lending.
How States Can Use SSBCI Funding
States that get SSBCI funding must use it to create new or enhance existing local small business lending programs, such as local loan guarantee, collateral support, and Capital Access programs.
- Loan Guarantee Programs: Under loan guarantee programs, states provide partial guarantees on certain small business loans to give lenders greater confidence to extend credit.
- Collateral Support Programs: Collateral support programs help viable businesses that are struggling to get credit because the value of the collateral they hold has fallen, often due to the decline in commercial real estate values.
- Capital Access Programs (CAPs): CAP programs are loan portfolio insurance programs designed to ensure lending stability to small businesses. Through CAPs, states provide small business lenders with a matching contribution to the lender's loan loss reserve. These reserve contributions encourage lenders to expand credit to new borrowers when they might otherwise be inclined to take that risk.
The amount of SSBCI funds a state is eligible to apply for is determined based upon formulas in the Small Business Jobs Act that take into account each state's respective unemployment rate and decline in employment relative to other states.
Finding Out About SSBCI Funding in Your Area
While the Treasury Department has provided a state-by-state list of initial SSBCI funding, more details on the SSBCI program in your area can be obtained from your state economic development agency.