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The State Small Business Credit Initiative can be a great tool for lenders and a valuable source of capital for entrepreneurs and small businesses, especially those from underserved communities. Read below to find out how SSBCI, which is administered by the Indiana Economic Development Corp., can work for you.
What is SSBCI?
The State Small Business Credit Initiative, or SSBCI, was created by the US Small Business Jobs Act of 2010 and reauthorized by the American Rescue Plan. SSBCI is administered by the US Department of Treasury. The funding was allocated to each state, the District of Columbia, territories and tribal governments across the country.
The purpose of SSBCI is to promote American entrepreneurship, support small business ownership, and increase access to capital for entrepreneurs and small businesses across the country, with a particular focus on underserved communities.
What is different about SSBCI 2.0?
SSBCI 2.0 is a reauthorization of the program from the Jobs Act of 2010; SSBCI 2.0 has specific set-asides and requirements to reach socially and economically disadvantaged small business owners, or SEDI, and very small businesses, which are businesses under 10 employees.
SEDI is a rather complicated definition. But the simplest way to think about it is that a business must be 51% owned by an individual who has had their access to credit diminished due to a bias based on one of the following criteria: race, ethnicity, culture, gender, veteran status, limited English proficiency, physical handicap, long-term residence in a rural community, or other “underserved communities.” Businesses that certify that they are owned and controlled by individuals living or operating their businesses in CDFI Investment Areas also qualify.
There is specific incentive funding that is only unlocked when state’s meet the SEDI and VSB (companies with 10 employees or less) targets that have been set by Treasury. Indiana’s target calls for 36.91% of funding to go to SEDI-owned businesses. In our case, that equates to just shy of $36 million.
How is Indiana deploying SSBCI funds?
With SSBCI funding, the IEDC’s goal is to provide access to capital and create ecosystems of opportunity, while promoting economic equity across the state. The IEDC is deploying SSBCI funds in two ways. First, we are investing in pre-seed and seed rounds through Elevate Ventures, Indiana’s venture development partner. These funds will be invested in Indiana-based companies through the Indiana Angel Network Fund alongside co-investors. We encourage other VC firms to bring deals to Elevate Ventures that might qualify for SSBCI direct investment.
Second, the IEDC has launched the Legend Fund, a loan participation program. The Legend Fund will distribute up to $29 million to mission-driven lenders, such as CDFIs and Revolving Loan Funds, to incentivize more lending to Indiana small businesses. Participating lenders manage loan terms, ensuring they align with the needs of borrowers. We are actively looking for mission-based lenders to participate in the program! You can find the open RFQ and more info on how to participate in the program at iedc.in.gov/ssbci.
What can businesses use SSBCI funding for?
SSBCI funds can be used for most general business purposes. That would include things like start-up costs, working capital, manufacturing, and more. There is a full list of guidelines available on the SSBCI website.
How can interested lenders or other partners engage with the IEDC?
If you are part of a mission-based lending institution or local revolving loan fund, the IEDC encourages you to go to iedc.in.gov/ssbci to find more details on how to participate in the Legend Fund. The IEDC is actively accepting and encouraging CDFIs, Revolving Loan Funds, and other mission-based lenders to respond to the current RFQ to take part in the program. The IEDC is operating the Legend Fund to purchase up to 49% of a loan made and managed by participating lenders to encourage those organizations to support more entrepreneurs and small businesses with the increased capital available in the ecosystem.
If you are a venture capital firm, the IEDC encourages you to engage Elevate Ventures to use SSBCI funds for co-investment in current and future funding rounds for entrepreneurs in Indiana.
How can small businesses with capital needs find the right Indiana partner?
The IEDC will soon launch a portal linking small businesses with lenders participating in the program. After answering a few questions about yourself and your business, a list of participating lenders that match your borrowing needs will be populated. You can reach out directly to the lenders from the site. If you visit IEDC.IN.GOV/SSBCI, you can input your information to be notified when this feature goes live!
What assistance will be available for small businesses looking to access funding?
The IEDC will be funding technical advice training for businesses as they prepare to seek financing through SSBCI and other similar programs. These training sessions will be focused on bookkeeping practices, financial statement preparation, and QuickBooks. With this training made available throughout the state and online to support entrepreneurs, the IEDC hopes to see more businesses accessing capital to grow their businesses in Indiana.
Where can everyone find more information about SSBCI and how Indiana is deploying funds?
The easiest place to find information on the IEDC’s SSBCI programming is to visit IEDC.IN.GOV/SSBCI. You can find a breakdown of the programs being offered, FAQs, and the future tool connecting interested borrowers to participating Legend Fund lenders.