Federal aid of $584 million will open soon for PA, NJ and DE business owners. Are you receiving yours?
the Senate rejected legislation last week that could have provided small businesses with up to $48 billion in additional aid to help them recover from the pandemic. So is this the end? With the expiration of the Small Business Administration’s Paycheck and Economic Disaster Loan Protection Program, does that mean all federal small business aid has run out?
The answer is no. Soon there will be another source of funds supported by the federal government. Small businesses in Pennsylvania, New Jersey and Delaware will soon be able to access $584 million in new $10 billion funding round State Small Business Credit Initiative Programotherwise known as SSBCI.
What is SSBCI? This is a program where the US Treasury Department distributes money to states, which then distribute the money to lending and financing agencies – community development financial institutions (CDFIs), community banks, minority depository institutions, investors and other non-profit organizations focused on economic development – to help local small businesses access capital they otherwise would not have been able to tap.
In 2011, more than $1.5 billion in SSBCI assistance was used to fund entrepreneurs across the country. The new program, which was signed into law on March 11, 2021, as part of the American Rescue Plan Act, reauthorized and funded the SSBCI to the tune of $10 billion. The money has not yet been distributed: there are still round trips to Washington around the timing and the final amounts. But Treasury officials tell me that the funds are expected to start flowing this summer to states, and then from states to participating community organizations.
“Capital remains a major hurdle for many small businesses, and it’s all about networks,” said Bruce Katz, co-founder and director of Nowak Metro Finance Lab at Drexel University, specializing in public reforms and private innovations that advance the well-being of metropolitan areas and their countries. “The SSBCI program will provide funding to organizations that may have a tradition of community reinvestment and have a better understanding of business owners in their area.”
Katz thinks these intermediaries have “grown over time” and are very mission-oriented. “They’re trying to help entrepreneurs in the metro area who have been bypassed by large equity investments,” he said. “Or they try to help disadvantaged businesses or individuals access capital for their business. The Delaware Valley is lucky because it has quite a rich network of these organizations.
So, do you want a share of this funding? You should start looking for information. A great place to find organizations in the area that offer funding through the SSBCI program is on the Council of Development Finance Agencies State Resource Map.
Know that these are not just traditional loans. SSBCI money will be used for venture capital programs (where investments will be made in qualified start-ups and other early-stage companies), loan participation programs (where an approved organization buys a stake in loans made by lenders or lending directly alongside private lenders), loan guarantee programs (where funds are used to give lenders the assurance that they will be partially repaid in the event of default), Collateral Support Programs (which set aside funds as collateral for new loans, allowing start-ups to borrow funds) and Access to Capital Programs (which provide portfolio insurance in the form of a loan loss reserve fund in case a loan cannot be repaid).
Ben Franklin Technology Partnersa Philadelphia nonprofit organization that helps both technology start-ups and established manufacturers with financing, business and technical expertise, is an example of a local finance company participating in this program.
“SSBCI will allow us to invest in more companies,” said Scott Nissenbaum, group president and chief executive. “The impact of the program for us and the impact on the region is quite dramatic because it’s that extra dollar that really allows us to be more flexible in our investments.”
Since SSBCI money is intended to finance businesses that otherwise could not obtain traditional financing (and, of course, to help those businesses create jobs), the financing requirements are less stringent than the requirements for a traditional bank loan. Interest rates, depending on the transaction, may be lower than market rates. The money can be used for just about anything, from working capital to inventory and equipment purchases. Minority business owners and establishments located in low-income economic areas will be given priority in some cases.
The key is to start the process now because, as Nissenbaum warned, “demand will definitely outstrip supply.”
His advice (and mine) is to target a number of participating organizations immediately. Call them, visit them, get to know them, and just as important, help them get to know you and your business.
Start building relationships before the money is available. Their job is to provide financing to businesses that need it, and you want to be at the top of the list.
But that doesn’t happen overnight. The application process is complex, so ask them about the different financing options and provide all the documents they need in advance – tax returns, historical financial statements, contracts and other documents – to start the application process. .
“Right now is a good time to talk to an accountant or business advisor and start contacting the entities that are going to distribute these funds,” Nissenbaum said. “You want to be high in their minds.”