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Why the SSBCI Is a Big Step in the Right Direction

As the dust has settled in the wake of the $1.9 trillion American Rescue Plan Act of 2021, we want to make sure a key element of the bill isn’t overlooked: The restoration of the State Small Business Credit Initiative (SSBCI).

The SSBCI was originally enacted in 2010 to “strengthen state programs that support financing of small businesses,” but it expired in 2017. Now, this version of the program will provide $10 billion to support new and small businesses responding to — and recovering from — the economic effects of the COVID-19 pandemic. As we wrote in America’s New Business Plan, “The SSBCI addressed gaps for all types of businesses through both debt and equity financing where traditional forms of capital were too often nonexistent.”

Between 90% and 95% of entrepreneurs who hire employees require some amount of financing to start their businesses. That’s why America’s New Business Plan specifically called on Congress to “make substantial funding available to states for strengthening the private financing of new businesses by expanding capital access.”

In the SSBCI’s previous iteration between 2011 and 2015, SSBCI programs led to $8.4 billion in new lending, and almost half of the recipients were businesses that were under five years old. In addition, 42% of financing went to low- and moderate-income areas.

“The restoration of SSBCI in this relief package will provide crucial federal support to small businesses and emerging entrepreneurs that will drive a robust and inclusive recovery from the pandemic recession,” said John Lettieri, president and CEO of the Economic Innovation Group.

Also, the SSBCI offers more than just much-needed money for American entrepreneurs. The program will go a long way to address the inequities that have vexed our current economy and recovery efforts.

As little as 12% of Black and Latino business owners who reported applying for support through the federal government’s Paycheck Protection Program (PPP) in the spring of 2020 received the help they requested, according to Federal Stimulus Survey Findings by Global Strategy Group.

The SSBCI specifically designates money to address these inequities that face business owners of color and those in underserved areas. According to the Congressional Research Service, the fund includes:

  • $2.5 billion for businesses owned and controlled by socially and economically disadvantaged individuals, including minority-owned businesses;
  •  $500 million for tribal governments;
  • At least $500 million for businesses, including independent contractors and sole proprietors, with fewer than 10 employees; and
  • $500 million for technical assistance to small businesses that need legal, accounting, financial, and other kinds of advice in applying for small business support programs.

It’s clear the SSBCI is a step in the right direction, given the dual pandemics of COVID-19 and racial injustice. Yet, more can — and must — be done to aid entrepreneurs of color who’ve struggled because of structural racism.

Among other things, America’s New Business Plan recommends “forming a public-private task force to evaluate the history and current impact of redlining and to recommend actions, including relevant changes to the Community Reinvestment Act, that will counter decades of disinvestment and discrimination.” Actions like this and others remain urgently needed.

As Lettieri noted, “Policymakers should not stop here, and should pursue additional steps aimed at addressing spatial inequality and economic disparities.”

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