Washington Small Business Credit Initiative

A combination of lending and investment programs designed for small businesses, the Small Business Credit Initiative (SSBCI) provided additional capital to Community Development Financial Institutions (CDFIs) and participating lenders to increase the flow of capital to underserved communities across the state who have been otherwise left out of traditional banking opportunities.

In 2021, President Biden signed The American Rescue Plan Act, which reauthorized and expanded the State Small Business Credit Initiative (SSBCI). The U.S. Department of Treasury (Treasury) appointed the Washington State Department of Commerce to implement and manage the Treasuy-approved SSBCI plan for the state.

The purpose of Treasury’s SSBCI program is to strengthen state programs that support private lending and investment. The goals of the state’s SSBCI programs are to address the capital needs of the smallest businesses and non-profit organizations in Washington, with a focus on under-resourced and under-banked communities.

A portion of all program funding is targeted to Very Small Businesses (VSB) and businesses owned by Socially and Economically Disadvantaged Individuals (SEDI). Working with private partners, Commerce expects to leverage new private capital (10:1 ratio) to expand lending and investment in small businesses and entrepreneurship, build small business ecosystems and create jobs.

SSBCI Programs

To serve businesses and nonprofits across the state, Commerce has created five separate programs. Commerce will announce programs as they become available with additional program information. The following is a list of Washington State SSBCI programs:

Small Business Flex Fund 2 (Micro Loan Program) – $63 million

The program works with participating Community Development Financial Institutions (CDFIs) to address the capital needs of the smallest businesses and non-profit organizations in Washington. The program participates by purchasing a portion of the loans from CDFIs to free up their existing capital to allow CDFIs to generate additional loans for small businesses.

This program focuses on under-resourced and under-banked communities that often struggle to access credit. Eligible Applicants can apply through the program’s web portal and will be matched with a participating lender who will work with the applicant to finalize interest rates and terms.

Once a loan is approved, the Small Business Flex Fund 2 will purchase a portion of the loan, freeing up capital that can be used by Community Development Financial Institutions (CDFIs) to fund additional loans.

The program is administered by Calvert Impact Small Business and Grow America, serving businesses and nonprofits with 50 or fewer employees and up to $5 million in revenue.

Learn more and apply at SmallBusinessFlexFund.org.

Collateral Support Program (CSP) – $10 million

The CSP is designed to complement the SBA’s 504 Loan Program and assists small businesses having trouble qualifying for financing due to a collateral shortfall in their 504 bridge loan. These funds are dedicated to short-term construction loans, and will address exposure and timing differences by providing commercial lending partners with bridge loan funds. These loans cover the second mortgage until the permanent SBA second mortgage takeout occurs, with deposits up to 20% of the collateral value as a CD (cash) with the third-party lender.

The CSP will be administered by Evergreen Business Capital Community Finance (EBCCF). The collateral support amount will not exceed $500,000 per borrower with CD terms between 6-18 months. 

The program is currently under development and is expected to launch summer 2024.

Revenue Based-Financing Fund (RBF) – $12 million

RBF was created to meet the growing demands of small businesses across the state. Offering upfront capital with repayment of loans based on a percentage of the business’s earnings, the program supports underbanked communities and businesses who could not obtain financing under traditional debt-based loan products.

Grow America Community Impact Loan Fund (Grow America CILF), along with other CDFI partners (CDFI or Implementation Partners), will make revenue-based investments in small business across Washington State. Rather than charging interest, pricing will be fixed, with a repayment variable ranging from 1.1x to 1.5x base investment. Repayment is variable and based on monthly or quarterly revenue.

The Fund will initially offer three RBF products:

  1. Micro business RBF investments. Denkyem Co-op’s Scale loan provides working capital between $10,000 – $50,000 to support entrepreneurs growing their businesses.
  1. Business growth RBF investments. Grow America CILF’s Ajust product will provide financing of working capital as well as equipment and machinery with amounts between $85,000 – $500,000 to existing business to support growth.
  1. Sharia Compliant/Wakalah Product. Business Impact Northwest’s (BINW) Wakalah Financial Product is a Sharia compliant financial product. This product is based on a revenue redemption equity model and complies with Sharia restrictions against the charging of interest.

The RBF program is currently under development and is expected to launch summer 2024.

Owner-Occupied Commercial Real-Estate Loan Program (CRE) – $25 million

CRE expands access to capital and reduce lending risks while lowering borrowing costs for small businesses and non-profit organizations by offering a subsidized loan. The program benefits small business owners by lowering debt payments due to low loan interest rates and interest-only structured loan products, resulting in improved cash flow and opportunities for business growth.

The program is designed to assist small businesses in qualifying for financing and lowering their business risk when undertaking owner-occupied real estate loans. CRE targets Socially and Economically Disadvantaged business owners and Very Small Businesses with funding for owner-occupied commercial real estate loans that could be used for tenant improvements, construction, purchase or refinance.

The program is administered by HBCDE, LLC, which will offer companion loans with SSBCI funds and targets loans up to $5 million with 10-year terms.

Venture Capital Fund – $49 million

Washington State SSBCI funds will participate in three separate venture capital funds dedicated to providing early-stage funding to support the growth of Washington businesses. Venture capital funds have diverse investment teams who focus on investing in underserved startups or targeted investment objectives such as social equity, climate tech innovations, information technology, AI and machine learning.

Flying Fish Partners
Based in Seattle, Flying Fish Partnersis an early-stage venture firm focused on investing in high-potential AI and ML technology companies in the U.S. and Canada.

Pier 70 Ventures
With locations in Indianapolis, New York, San Francisco and Seattle, Pier 70 provides vital resources, connections, and support for entrepreneurs to scale up their companies and drive transformation in healthcare.

VertueLab
VertueLab is a nonprofit fighting climate change by providing funding and holistic entrepreneurial support to Climate Technology startups that will speed the transition to sustainable and low-carbon economy.

SSBCI Technical Assistance Program – $2 million

To increase access to Washington’s SSBCI Capital Programs, Treasury has allocated funding to Commerce to implement its SSBCI Technical Assistance (TA) Program. This program ensures businesses can access resources to help them apply for and obtain capital from SSBCI funding or other federal or state small business programs. 

TA providers will offer technical assistance to Very Small Businesses (VSBs) and Socially and Economically Disadvantaged Individuals (SEDI) owned businesses (eligible beneficiaries) across the state to prepare them to apply for loans or investment opportunities through the Small Business Credit Initiative Capital Programs.

The TA program is currently under development.

The Washington Department of Commerce, is currently initiating Request for Proposals (RFP) to solicit Proposals from those qualified to offer statewide technical assistance: Request for Proposals – State Small Business Credit Initiative Technical Assistance Program – Washington State Department of Commerce

Frequently Asked Questions (FAQs)

When will Washington State’s SSBCI programs launch?

The programs are expected to become available in 2024 for businesses to apply through contracted lending and equity partners.

Will there be grant funding available through SSBCI programs?

No. The SSBCI funds are implemented as loans or equity investments only; the programs do not offer grants.

How does a small business apply for the SSBCI program funding?

Small businesses do not apply directly to Commerce for funding. Applications will be made through separate program pages managed by the fund administrators and or program participating lenders. Information for how to apply will be posted as the programs become available.

How does Treasury define a Very Small Business (VSB)?

A VSB refers to a business with fewer than 10 employees at the time of loan application and or investment. It includes independent contractors and sole proprietors.

How does Treasury define a Socially and Economically Disadvantaged Individual-owned (SEDI) business?

As referenced in the SSBCI Capital Program Policy Guidelines (PDF), “meeting the needs of SEDI-owned businesses” means that the SSBCI funds are expended for loans, investments or other credit or equity support to:

  1. business enterprises that certify that they are owned and controlled by individuals who have had their access to credit on reasonable terms diminished as compared to others in comparable economic circumstances, due to their:
  • membership of a group that has been subjected to racial or ethnic prejudice or cultural bias within American society
  • gender
  • veteran status
  • limited English proficiency
  • disability
  • long-term residence in an environment isolated from the mainstream of American society
  • membership of a federally or state-recognized Indian Tribe
  • long-term residence in a rural community
  • residence in a U.S. territory
  • residence in a community undergoing economic transitions (including communities impacted by the shift towards a net-zero economy or deindustrialization)
  • membership of an underserved community (see Executive Order 13985, under which “underserved communities” are populations sharing a particular characteristic, as well as geographic communities, that have been systematically denied a full opportunity to participate in aspects of economic, social, and civic life, as exemplified by the list in the definition of “equity,” and “equity” is consistent and systematic fair, just, and impartial treatment of all individuals, including individuals who belong to underserved communities that have been denied such treatment, such as Black, Latino, and Indigenous and Native American persons, Asian Americans and Pacific Islanders and other persons of color; members of religious minorities; lesbian, gay, bisexual, transgender, and 10 queer (LGBTQ+) persons; persons with disabilities; persons who live in rural areas; and persons otherwise adversely affected by persistent poverty or inequality);
  1. business enterprises that certify that they are owned and controlled by individuals whose residences are in CDFI Investment Areas, as defined in 12 C.F.R. § 1805.201(b)(3)(ii);
  2. business enterprises that certify that they will operate a location in a CDFI Investment Area, as defined in 12 C.F.R. § 1805.201(b)(3)(ii); or
  3. business enterprises that are located in CDFI Investment Areas, as defined in 12 C.F.R. § 1805.201(b) (3) (ii).
Owned and Controlled definition:
  • • If privately owned, 51% is owned by such individuals
    • If publicly owned, 51% of the stock is owned by such individuals
    • In the case of a mutual institution, a majority of the board of directors, account holders, and the community which the institution services is predominantly comprised of such individuals

Where can I find more program information about the State Small Business Credit Initiative (SSBCI)?

For more information regarding the State Small Business Credit Initiative (SSBCI) program, please visit the U.S. Department of Treasury’s SSBCI program page.

Attention
The SSBCI funds are implemented as loans or equity investments across the state. This program does not offer grants.

Contact

Linda Womack, Managing Director
Email: SSBCI@Commerce.wa.gov

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Resources

For more information regarding the State Small Business Credit Initiative (SSBCI) program, please visit the U.S. Department of Treasury’s SSBCI program page.