This week, California Gov. Gavin Newsom and State Treasurer Fiona Ma announced more than $1.1 billion in funding to support the state’s small businesses (see open enrollment lender information down below). The funding comes from the U.S. Treasury Department’s State Small Business Credit Initiative 2.0 (SSBCI 2.0) and is intended to leverage-up to an additional $18 billion more in capital.

The funding comes from a portion of the federal American Rescue Plan Act of 2021. The California Infrastructure and Economic Development Bank (IBank) and the California Pollution Control Financing Authority (CPCFA) will split the allocation equally to fund small business credit support programs. Additionally, IBank will launch a new program designed to create a more equitable venture capital ecosystem.

CPCFA, chaired by Ma, and IBank jointly applied for the SSBCI 2.0 allocation based on their successful programs for the original SSBCI in 2010. This week’s news culminates in the second time states have been able to apply for this federal program. The first was from 2010 – 2017, when California applied for and received $168 million to operate three state credit-support programs — the Small Business Loan Guarantee Program, the Collateral Support Program, and the California Capital Access Program (CalCAP) for Small Business.

Loan Guarantee Program & Encouraging Lenders
As in 2010, IBank will use a large portion of the SSBCI funds for its Small Business Loan Guarantee Program, working with nonprofits and lenders to offer small business loan guarantees. The guarantees can repay lenders up to 80 percent of a small business’s outstanding loan if it is unable to make the payments.

By guaranteeing loans, IBank gives lenders the confidence they need to issue loans to small businesses that otherwise struggle to access capital.

To deploy funds quickly and put them in service to small businesses, IBank is asking lenders — including community development financial institutions and minority depository institutions — to sign up to use its loan guarantee program. Certification requires only a one-page form. The list of lenders already participating is available on IBank’s Participating Lenders list.

SSBCI 2.0 Program
SSBCI 2.0 is designed to increase access to capital and provide education for small businesses through partnerships with private sector and non-profit lenders, equity investors, and technical assistance providers. CPCFA and IBank will direct SSBCI 2.0 funding to financial institutions and investors when they serve small businesses by making loans and equity investments.

Goals for SSBCI 2.0 investment include, but are not limited to, increasing investment in manufacturing businesses, businesses owned by socially and economically disadvantaged individuals (SEDI), and very small businesses (VSBs) characterized by having 10 or fewer employees.

Lender Enrollment is Open
The first tranche of approximately $500 million will be divided equally between CPCFA and IBank. Both entities will then commence rulemaking processes to implement the funds.

Financial institutions interested in receiving support to serve small businesses through the CalCAP for Small Business loan loss reserve program and the CalCAP Collateral Support Program can enroll with a simple one-page certification by emailing ssbci@treasurer.ca.gov (use SSBCI 2.0 lender inquiry from STO press release in your email subject line).

Any business qualifying as a small business can apply with a participating financial institution, which can then enroll that loan in a CPCFA SSBCI 2.0 program (or a small business can request a financial institution with which they have an existing business relationship to enroll to participate).

In order to meet a variety of small business needs, CPCFA plans to develop a loan participation program for future tranches.

Tweet