On March 11, 2021, President Biden signed The American Rescue Plan Act (ARPA), which reauthorized and funded the State Small Business Credit Initiative (SSBCI). The new version of the SSBCI program provides a combined $10 billion to states, the District of Columbia, territories, and Tribal governments to empower small businesses to access capital needed to invest in job-creating opportunities as the country emerges from the pandemic.
The funds will also support promoting American entrepreneurship and democratizing access to startup capital across the country, including in rural and underserved communities.
SSBCI provides states and tribal entities with funding for:
- Credit and investment programs for existing small businesses and start-ups
- Technical assistance to small businesses applying for SSBCI funding and other government small business programs
AT A GLANCE
SSBCI in Alaska
Alaska is allocated to receive roughly $59,000,000 over the course of the 10-year program. The AK SBDC is the administrative lead on the program for the state and will deploy the funding to lenders and investment funds.
The Alaska SSBCI program is deploying it’s $59 million in funding through the following funding programs:
- Venture Capital/Equity Funds – $10 million
- Loan Participation Program – $15.9 million
- Loan Guarantee Program – $32 million
- Collateral Support Program – $2 million
The AK SBDC will begin onboarding lenders by December 2022 and will start processing loans in January 2023.
The Four Alaska SSBCI Funding Programs
Funding amounts for these programs may change over time based on usage and feedback from businesses and private sector lenders/investors. The basic requirements for borrowers in these programs are:
- Business must have fewer than 750 employees
- Business must be operating in the State of Alaska
- Loans/Investment Rounds must be $20 million or less
- Not registered sex offenders
Program funds can not be used for the following:
- Cannabis related businesses
- Passive real estate investments
- Purchasing an owners’ share in the business or reimbursement of owner contributions
- Paying off existing loans (some limited exceptions)
- SSBCI funds cannot be used in connection with other federal funding programs (SBA, USDA, EDA, BIA, etc)
Prioritization and Objectives
The Alaska SSBCI program will prioritize supporting investments in businesses owned and controlled by Socially and Economically Disadvantaged Individuals (SEDI) and Very Small Businesses (VSB).
The definitions of those businesses are:
Socially and Economically Disadvantaged Individuals (SEDI)
Defined by reference to section 8 of the Small Business Act (15 U.S.C. 637), the definition includes:
- Socially disadvantaged individuals are those who have been subjected to racial or ethnic prejudice or cultural bias because of their identity as a member of a group without regard to their individual qualities.
- Economically disadvantaged individuals are those socially disadvantaged individuals whose ability to compete in the free enterprise system has been impaired due to diminished capital and credit opportunities as compared to others in the same business area who are not socially disadvantaged.
Very Small Business (VSB)
Very Small Business is defined as a business with fewer than 10 employees; and may include independent contractors and sole proprietors.
U.S. Treasury Objectives
The program has a capital allocation to businesses owned and controlled by socially and economically disadvantaged individuals (SEDI-owned businesses), along with incentive funds for states and tribal entities that demonstrate robust support for SEDI-owned businesses.
Catalyze Private Investment
Over the ten year life of the program, the SSBCI is designed to leverage $10 of private sector funding for every $1 of SSBCI capital program funding deployed, magnifying the effects of the federal funds allocated through the program.
Fuel Economic Growth and Good Jobs
SSBCI will build on the Administration’s work to support small businesses while combating long standing structural inequities in access to credit and unequal opportunities for growth revealed and exacerbated by the pandemic.