State Small Business Credit Initiative Increasing Access to Capital for Florida’s Small Businesses Presented by: Stephen Heiman
SMALL BUSINESS JOBS ACT OF 2010 • Created the State Small Business Credit Initiative (SSBCI). • $1.5 billion available from the U.S. Department of Treasury to establish or strengthen state programs that increase access to private capital for small businesses. • By leveraging private capital, the SSBCI is expected to spur up to $15 billion in lending to small businesses. • For more information: http://www.treasury.gov/resource- center/sb-programs/Pages/ssbci.aspx
SSBCI FLORIDA ALLOCATION • Florida + $97 Million = $970 Million for Small Business Lending • The allocation of funds per state is set by a statutory formula based on the unemployment rate. States’ allocations are available at http://www.treasury.gov/press-center/press- releases/Pages/tg896.aspx. • Funds will be disbursed in 3 installments. – First installment = $32,228,575 – 80% of the first federal disbursement must be obligated before the successive thirds can be received.
APPROVED STATE PROGRAMS • Eligible program types and use of funds are prescribed by the Act and the U.S. Treasury Policy Guidance. • Florida’s approved programs are: – Capital Access Program – Venture Capital Program (EFI) – Small Business Loan Support Program (EFI)
CAPITAL ACCESS PROGRAM (CAP) • The CAP is a loan portfolio insurance program that enables lenders to make loans that fall just outside their conventional lending standards. • Loans enrolled in the CAP may be covered up to 100% on certain defaults. • The lender and borrower pay an up-front premium (2-7%) into a reserve fund held at the originating financial institution. • SSBCI funds are used to match the combined lender/borrower contribution by depositing cash into the lender held reserve fund. • As the reserve account grows, so does the lender’s cash collateral to cover losses on its entire portfolio of CAP loans.
HOW DOES A CAP WORK?
ELIGIBLE BORROWERS • Target: Small Business unable to find financing for expansion • Businesses located and legally authorized to do business in Florida. • Small businesses with up to 500 employees (with some flexibility). • For-profit and not-for-profit businesses are eligible • Certain businesses/activities are ineligible, e.g., speculative activities, passive real estate investments, firms involved in lending activities, gambling activities…
ELIGIBLE LOAN TYPES AND USES • Loans up to $5 million- the average CAP loan trends in other states = $60,000. • Broad eligibility on loan types, but usually term loans and lines of credit • Must be used for a business purpose, including but not limited to: Start up costs, working capital, business procurement, franchise fees, equipment, inventory, and the purchase, construction, renovation, or tenant improvements of an eligible place of business that is not for passive real estate investment.
LENDER BENEFITS Mechanism to provide loans to small businesses that may not otherwise be able to obtain a loan under conventional underwriting. Expands the small business customer base. – Limits exposure to loses through a reserve fund. Lenders are able to cover portions of loans that exceed – risk thresholds normally set for business loans. No cost to participate, no required loan volume, no require audit. Lender Flexibility
WHAT TYPES OF LENDERS CAN PARTICIPATE? Lenders may include: • Qualified Public Depositories Federally Insured Banks and Credit Unions Community Development Financial Institutions Lenders must demonstrate sufficient commercial • lending experience and financial and managerial capacity to participate.
HOW CAN LENDERS PARTICIPATE? 1. Sign a Participation Agreement with DEO. 2. Open a Reserve Account. 3. Start enrolling CAP Loans. 4. Report Loans to the State by Enrollment Form.
OUTREACH EFFORTS • Currently have two (2) participating banks: 1. Wells Fargo 2. BB&T • DEO has reached out to more than 150 lending institutions in Florida. • DEO is partnering with: – Federal Reserve Bank of Atlanta – Office of the Comptroller of the Currency – Two (2) Credit Union Service Organizations – Southeastern League of Credit Unions • We have conducted presentations to a number of local municipalities including: Volusia County, Martin County, the City of Tallahassee and the City of Tampa
H OW Y OU C AN H ELP • Targeting Credit Unions • Support from the Small Business Community • $97.6 Million to spend in the next 2 years
OTHER CREDIT SUPPORT PROGRAMS • Contract with Enterprise Florida, Inc. – Venture Capital Program – Small Business Loan Support Program • $77 Million in funding • Led by Jay Robinson – Director, Capital Programs
FOR MORE INFORMATION • For general SSBCI information and CAP program information or to become a Participating Lender contact, Brook Pace, Bureau of Economic Development (850) 717-8519 brook.pace@deo.myflorida.com Or visit us on our website: www.floridajobs.org/ssbci • For Venture Capital and Small Business Loan Support Program information contact, Jay Robinson, EFI ssbci@eflorida.com www.eflorida.com/ssbci
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