State Small Business Credit Initiative (SSBCI)

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Federal program providing funding to states and territories to expand small business access to capital through tailored state-administered credit programs and technical assistance.
What are the main aims and objectives?

The primary objectives of SSBCI are to expand access to capital for small businesses and entrepreneurs, particularly those in underserved communities; to promote small business stability, growth, and success; to stimulate entrepreneurship and economic growth; to create high-quality jobs through supporting small business development; and to build ecosystems of opportunity and entrepreneurship across American regions.

SSBCI aims to provide tailored financial programs addressing regional and community-specific capital gaps and constraints; to support very small businesses (fewer than 10 employees) through dedicated funding allocations; to support underserved entrepreneurs including Socially and Economically Disadvantaged Individuals (SEDI), women entrepreneurs, minority entrepreneurs, and rural entrepreneurs; to leverage private capital and encourage private lenders to deploy capital to small business markets; to catalyze private investment to maximize the multiplier effect of federal funding; to reduce risk for private lenders through various program mechanisms (loan guarantees, collateral support, participation); to provide technical assistance enabling small businesses and entrepreneurs to access capital more effectively; and to build resilience in rural and underserved communities through economic diversification and entrepreneurship support.

How does the program work?

SSBCI operates through multiple mechanisms and program types that participating jurisdictions can deploy based on their specific needs:

Program Types and Capital Structures:

States and jurisdictions can implement five types of capital programs funded through SSBCI allocations:

Loan Participation Programs use SSBCI funds to purchase a portion of private loans or supply additional loans alongside private lender funding, reducing private lender risk exposure. Loan Guarantee Programs use SSBCI funds to guarantee a portion of private loans, enabling private lenders to offer credit to businesses they might otherwise consider too risky. Collateral Support Programs provide cash collateral enabling small businesses to take out larger loans or additional loans they might not otherwise qualify for. Capital Access Programs establish loan loss reserve funds that insure private lending to small businesses, reducing lender risk. Equity/Venture Capital Programs use SSBCI funds for direct equity investments in startups and early-stage companies, particularly targeting underserved founders and venture fund managers.

Allocation and Deployment Structure:

Treasury allocates SSBCI funds to approximately 120 participating jurisdictions including all 50 states, Washington D.C., territories, and Tribal governments. States receive their allocations in three tranches (disbursements) based on demonstrated fund deployment and achievement of program milestones. This tranche structure incentivizes active program implementation rather than fund hoarding.

Leverage Requirements and Private Capital Mobilization:

All programs must demonstrate minimum 1:1 leverage ratio (at minimum, $1 of private capital for every $1 of SSBCI funding), with federal goal of achieving 10:1 leverage ratio (up to $10 private capital per $1 SSBCI). This structure incentivizes programs to deploy SSBCI funds as "catalyst capital" attracting private investment rather than replacing private capital.

Focus on Underserved Businesses and Very Small Businesses:

SSBCI allocations include sub-allocations for Very Small Businesses (under 10 employees) and Socially and Economically Disadvantaged Individuals (SEDI), with jurisdictions setting targets to spend at least 49% of SSBCI funds supporting SEDI-owned businesses. Jurisdictions that demonstrate "robust support" for underserved businesses receive incentive allocations.

Technical Assistance:

Treasury allocated $400 million for technical assistance programs (separate from capital programs) enabling businesses to prepare for capital access, with $200 million distributed by formula to jurisdictions for legal, accounting, and financial advisory services.

What is the overall cost?

The State Small Business Credit Initiative has received two major federal appropriations:

  • SSBCI 1.0 (2010): $1.5 billion initial federal appropriation following the Great Recession
  • SSBCI 2.0 (2021): $10 billion reauthorization and expansion through the American Rescue Plan Act of 2021
How was it implemented?
Congress established the State Small Business Credit Initiative in 2010 following the Great Recession with $1.5 billion initial appropriation to promote small business entrepreneurship and provide expanded access to capital, particularly for small businesses and underrepresented regions. The 2010 program demonstrated concept viability and proved that state-administered capital programs could effectively expand access to credit. From 2010 onward, SSBCI 1.0 operated with relatively modest funding, demonstrating effective deployment models across diverse states. The Treasury Department tracked outcomes and established regulatory frameworks for program administration. By 2016, SSBCI 1.0 had supported $10.7 billion in loans and investments through state programs, with median supported business having 3 full-time employees and creating or retaining over 240,000 jobs. In response to COVID-19 pandemic economic disruption, Congress included SSBCI reauthorization and substantial expansion in the American Rescue Plan Act of 2021, providing $10 billion (over six times the original program size) to states, territories, and Tribal governments (newly included in 2021 authorization). The reauthorization reflected recognition that pandemic-era capital gaps for small businesses required substantial federal support to mobilize state and private capital. The 2021 reauthorization ("SSBCI 2.0") implemented significant equity-focused reforms including: new $1.5 billion allocation for underserved businesses, $1 billion in incentive allocations for jurisdictions demonstrating robust support for underserved businesses, sub-allocations for Very Small Businesses, enhanced focus on Socially and Economically Disadvantaged Individuals (SEDI), and integration of technical assistance funding ($400 million) recognizing that capital access requires supporting business readiness and preparation. Following 2021 reauthorization, Treasury Department launched SSBCI 2.0 administration including accepting and reviewing applications from jurisdictions (completed by September 2022), approving jurisdiction applications and allocating funds in three tranches based on deployment metrics, requiring quarterly and annual reporting from jurisdictions on fund deployment and outcomes, and monitoring program performance toward 10:1 leverage ratio goals.
What impact has been measured?

The SSBCI Program Evaluation Report presents an analysis of SSBCI program activity from 2011 to 2015. It draws on quantitative data reported to Treasury by the states combined with more than 200 telephone interviews with state program managers, several expert practitioner working group reports, more than 50 lender and investor interviews, and more than 20 site visits conducted between 2012 to 2015. From this data and cumulative insights, this report offers an assessment of program results and lessons for public-supported financing programs.

Between 2011 and 2015, SSBCI programs led to $8.4 billion in new lending, and almost half of the recipients were young businesses (under 5 years old). In addition, 42% of financing went to low- and moderate-income areas. Furthermore, the median capital access program loan size was just $14,800, helping to fill funding gaps in regard to small to midsize loans.

The Start Us Up Coalition highlighted this program in America's New Business Plan to show how federal, state and local governments can expand access to capital. A couple of features made it a succesful policy instrument: 

  • The State Small Business Credit Initiative's (SSBCI) flexibility allowed states to design programs that addressed their specific needs in a variety of ways.
  • The SSBCI addressed gaps for all types of businesses through both debt and equity financing where traditional forms of capital were too often nonexistent.
What lessons can be learned?

The expiration of the SSBCI Program in 2017 left a void in the marketplace for affordable small business loans. The programs created by states under the original SSBCI are still in operation and would be ready to immediately deploy capital to businesses in need.

Reauthorization of SSBCI was one of the key tenets of The Council of Development Finance Agencies’s COVID-19 Comprehensive Recovery Strategy.

CURATED BY

Jason Wiens

Policy Director, Entrepreneurship
Ewing Marion Kauffman Fundation
United States