Treasury S State Small Business Credit Initiative (SSBCI)

Treasury’s State Small Business Credit Initiative (SSBCI)

The immediate policy goal of the SSBCI is to generate $1 of private lending for every $1 of federal funding, with a long-term target of 10:1 private funding leverage. Every state was allocated SSBCI funds except Alaska, North Dakota, and Wyoming, where the SSBCI funding went to a municipality or a consortium of municipalities.

To help ensure that SSBCI-funded programs address local economic and market conditions, Congress gave the states the ability to develop programs that work in their communities. States submitted applications to Treasury for SSBCI funds that detailed how they planned to expand credit to small businesses in underserved communities. SSBCI program staff reviewed these applications and has approved more than 140 state programs, which include:
• Loan guarantee programs;
• Loan participation programs;
• Collateral support programs; and
• Capital access programs.

The states are making every effort to make these programs easy to use, and most allow lenders to retain full control of the underwriting and credit decision-making.

The law set forth a funding formula for the state allocation of SSBCI funds based on population and job loss and all states were allocated at least $13 million. The window for states to draw their allocation of SSBCI funds ends in March 2017. A real benefit of this program is that the funds remain with the state in perpetuity: as funds are repaid, they can be used to support other state small business lending programs.

According to Clifton Kellogg, SSBCI Director, community banks should look at the SSBCI program as another tool to help make small business loans. The SSBCI program can complement the Small Business Administration’s (SBA) programs. For instance, loans that need credit enhancement but that do not justify the cost of securing the 75 percent SBA guarantee may be a good fit for SSBCI programs. States are also allowed to use SSBCI funds for unconventional opportunities, such as loans to non-profits. Another possible use of SSBCI funds is for interim financing during the construction phase of an SBA 504 transaction until take out by the SBA debenture. Some states focus on short-term working capital financing, which also helps meet the SSBCI’s leverage requirements.

The federal banking agencies are familiar with the SSBCI program requirements. For example, the Office of the Comptroller of the Currency (OCC) created a dedicated page on its website with an overview of the program and frequently asked questions. The FAQs explain that certain small business loans made under this program may qualify for CRA consideration.

The SSBCI offers community banks an opportunity to serve small business borrowers that otherwise may not be able to receive a loan. Learn more about the SSBCI and the programs available in your state click here.