New data show how communities are using the nearly $22 billion made available for thousands of small business support projects across three Treasury Department-led programs, in addition to $12.8 billion reported for over 4,200 worker support projects
WASHINGTON – Today, the U.S. Department of the Treasury released a report card detailing how the Department’s implementation of federal investments in entrepreneurs and small businesses – including those in President Biden’s American Rescue Plan – are sustaining the continued record growth in small business creation. These programs are key to the Biden-Harris Administration’s strategy to strengthen the small business creation seen since the start of this Administration by expanding access to capital and customers, and by providing entrepreneurs the resources they need to succeed.
In January, the Census Bureau released data which show that Americans have applied to start 10.5 million new businesses over the last two years, making 2021 and 2022 the strongest two years on record for new business applications. To sustain small business growth, record demand was met with new federal resources. The Treasury Department has taken the lead role in implementing programs and initiatives to support small businesses across all communities. The Department’s work has also helped these funds reach traditionally underserved entrepreneurs and small businesses that will ensure the small business boom grows the economy in communities that were disproportionately harmed by the pandemic.
Through June 2023, three Treasury Department-led programs – the State Small Business Credit Initiative (SSBCI), State and Local Fiscal Recovery Funds (SLFRF), and Emergency Capital Investment Program (ECIP) – have together provided billions of dollars for projects and lending to grow the small businesses ecosystem.
- The State Small Business Credit Initiative – reauthorized and expanded under President Biden’s American Rescue Plan – provides nearly $10 billion to increase access to capital and promote entrepreneurship, including $2.5 billion in funding and incentives to support underserved businesses and jurisdictions that are successful in reaching those businesses. To date, the Treasury Department has announced the approval of applications for capital programs representing $8.2 billion in potential funding. SSBCI funding is expected to catalyze up to $10 of private investment for every $1 of SSBCI capital funding.
- New data released on October 16, 2023, demonstrate that states, territories, and the largest cities and counties that received State and Local Fiscal Recovery Funds have budgeted 85% of total resources, and projects are up 18% compared to the first quarter of 2023. This includes over $5 billion for over 1,400 projects to support small businesses and small business development.
- Through the Emergency Capital Investment Program, the Treasury Department invested more than $8.5 billion into community development financial institutions (CDFIs) and minority depository institutions (MDIs). Among other things, these funds are designed to support CDFIs and MDIs in providing loans, grants, and forbearance for small businesses, minority-owned businesses, and consumers, especially in low-income and underserved communities.
Alongside this report card, the Treasury Department today released an interim report on the progress the Department has made in implementing the SSBCI, which illustrates how the funding has both supported the small business boom and demonstrated a historically broad reach. The interim report highlights four small businesses leveraging SSBCI funding, including a consultancy supporting the Latino community in Pennsylvania, a woman-owned telehealth startup in Maryland, and a Tribal LLC in Alaska. This report demonstrates how SSBCI is helping to support President Biden’s Investing in America Agenda and grow the economy from the bottom up and middle out, not the top down.
Expanding access to capital and customers and catalyzing growth for traditional and innovative sectors
The State Small Business Credit Initiative is designed to catalyze private capital through loans to and investments in small businesses, including in historically underserved communities and among entrepreneurs who often lack the support needed to pursue their business ambitions. This support can be transformative in a range of industries promoting key national priorities, like manufacturing, as well as on Main Streets across the country. Over 60% of SSBCI funding under approved applications has been allocated to support credit programs, which will allow jurisdictions to offer loans or credit enhancements to help small businesses unlock additional private financing for purposes ranging from equipment or qualifying owner-occupied real estate purchases, to working capital that supports payroll or inventory purchases.
- In Wichita, Kansas, SSBCI helped fund WorkTorch – a pioneering career platform for service workers. The company’s founders are the first Black women in Kansas to raise over $1 million in venture funding.
The remaining 39% of approved SSBCI funding is allocated to support equity/venture capital programs – programs that will catalyze private investment in small and growing companies and will crowd in private investment from individual or institutional investors and venture capital funds. These investments contribute to individual small business growth while creating ecosystems for innovation or growing industry clusters in regions with emerging venture capital markets.
- The State of Vermont is implementing a venture capital program to invest in start-ups across the state, with a focus on growing the innovation ecosystem outside Vermont’s more populous hubs. Areas of concentration include renewable energy, innovative agriculture solutions, advanced manufacturing, and healthcare companies.
Helping Main Street launch and scale their businesses
In addition to the SSBCI Capital Program – designed to provide a sustainable source of capital to governments for small business financing programs – the Emergency Capital Investment Program was created to encourage low- and moderate-income community financial institutions to augment their efforts to support small businesses and consumers in their communities. In its implementation of ECIP, the Treasury Department has incentivized “deep-impact lending,” such as loans to low-income borrowers and underserved small businesses, to help level the playing field for borrowers that face the greatest barriers to accessing capital.
- Earlier this year, Hope Federal Credit Union, based in Mississippi, made a $10,000 small business loan to a Black- and woman-owned organic, fresh-roasted coffee distribution business based in Louisiana to expand operations.
Supporting small business development and helping workers retrain and upgrade skills
The American Rescue Plan’s State and Local Fiscal Recovery Funds program continues to deliver critical financial support to communities across the country, including for investments that support local businesses and workforces. Through June 30, 2023, state, local, Tribal, and territorial governments have budgeted over $5 billion for over 1,400 projects to support small businesses and small business development – an almost 15% increase since January 2023.
- The State of Michigan is utilizing $75 million for the Michigan Strategic Fund, which will operate programs to support small businesses disproportionately impacted by the COVID-19 pandemic.
The small business support funding is in addition to the $12.8 billion in SLFRF funds that over 2,000 governments have budgeted for over 4,200 worker support projects, including for job training and public sector workforce investments.
- Douglas County, Minnesota is obligating $500,000 in SLFRF funds to provide tuition-free retraining and upgrading skills, including manufacturing or small business boot camps.
Expanding businesses’ ability to reach new markets and customers
Entrepreneurs and small businesses in underserved communities can benefit from technical assistance to secure resources and capital to reach their full potential and grow the economy. Technical assistance can help a small business bridge the gap between qualifying for or accessing additional small business financing, and being perceived as “unfundable” to the conventional financing market. The SSBCI program includes a dedicated technical assistance program that supports jurisdictions in providing legal, accounting, and financial advisory services to qualifying very small and underserved businesses. Within the SSBCI Technical Assistance Grant Program, the Treasury Department has allocated $200 million to states, territories, Tribal governments, and the District of Columbia. Treasury has already announced the approval of $57 million for 12 state plans, with additional awards to be announced in the coming months.
In addition, the Treasury Department deployed SSBCI funding to support the Minority Business Development Agency (MBDA) by funding MBDA’s Capital Readiness Program. Through the Capital Readiness Program, MBDA will help enable entrepreneurs and business owners to obtain the information they need to access funding through small business support programs. This is based on the belief that when entrepreneurs and small business owners in all communities have a chance to compete and thrive, it increases our country’s entire economic potential and growth.
Working across the Biden-Harris Administration to enhance efforts
In addition to the Capital Readiness Program, the Treasury Department has played a key role in broader efforts across the Biden-Harris Administration to maximize impact. For instance, last year, the Department joined five other agencies to form the Interagency Community Investment Committee (ICIC), an interagency coordinating body that aims to foster collaboration and alignment in the implementation of programs that facilitate the flow of capital and the provision of financial resources into underserved communities. Chaired by Deputy Secretary of the Treasury Wally Adeyemo in its first year, ICIC recently announced a slate of new actions that will strengthen how federal community investment programs serve communities across the country that have historically lacked access to resources and capital including communities of color, low-income communities, rural areas, and Tribal communities. The Department has also heeded President Biden’s direction to increase the share of federal contracts going to small disadvantaged businesses. In the past two years, the dollar amount of contracts awarded by the Treasury Department to Black-owned businesses increased by 60%, and by 23% to Latino-owned businesses.
Working with the private and philanthropic sectors to maximize federal investments
A coordinated partnership between the public and private sectors is crucial to address economic inequality across the nation and maximize the impact of the Biden-Harris Administration’s unprecedented investments. The Treasury Department has worked closely with the Economic Opportunity Coalition (EOC), a group of nearly 30 private sector organizations and foundations working to make historic investments in underserved communities. In June, the EOC announced that it had reached its goal of securing $1 billion in committed deposits in CDFIs and MDIs, which will enhance the impact of federal ECIP investments. Further, SSBCI funding is expected to catalyze up to $10 of private investment for every $1 of SSBCI capital funding.
Today’s small business report card and interim report come ahead of the Treasury Department’s third annual Freedman’s Bank Forum on October 25, where senior Biden-Harris Administration officials will join key leaders from the public, private, nonprofit, and philanthropic sectors to discuss the Biden-Harris Administration’s efforts to increase economic opportunity for communities of color. Media wishing to attend can RSVP to [email protected].