The federal government has implemented several programs and initiatives to help small businesses recover from the COVID-19 pandemic. One of these programs is the State Small Business Credit Initiative (SSBCI). SSBCI aims to improve the ability of small businesses to grow and create jobs by increasing their access to credit.
The recent allocation of nearly $202 million in federal funding to North Carolina as part of the American Rescue Plan Act (ARPA) is the second round of funding for SSBCI.
What kinds of funding can North Carolina businesses receive?
Each state has its own plan for distributing SSBCI funding. In North Carolina, funding is given through a variety of programs, all of which fall into two categories: loan programs and venture/equity programs.
Here is what you will see:
- Loan Participation Program: The Loan Participation Program is a program that helps small businesses in North Carolina get loans from banks and other lenders. The program works by working with banks and other big lending companies, called "institutional lenders," to help small businesses get the money they need. The program does this by buying a part of the loan, called "participation," from the lender. This helps the lender feel more comfortable providing the loan, because they know that the program is helping to back it up.
- Capital Access Program: The Capital Access Program (CAP) provides additional loan loss reserves to institutional lenders for business loans that they enroll.
- NC Venture Capital: The NC Venture Capital Program supports equity investments in early stage high growth small businesses in North Carolina.
Which SSBCI programs are open now in North Carolina?
- The Capital Access Program (CAP) is not open for applications at the moment, but will soon be available through partner lenders in all of North Carolina's 100 counties.
- The Loan Participation Program (LPP) is open for applications. It is an intermediary small-business lending program that works with banks, credit unions, and CDFIs, across North Carolina to help expand access to capital.
- NC Venture Capital is still currently in development, and will roll out in phases. The program overseers are still currently reviewing proposals to select a consultant to provide strategic support to the venture program.
What businesses are eligible for SSBCI funding?
To be eligible for the program, businesses must have fewer than 500 employees and must be able to demonstrate a need for capital.
What can the funding be spent on?
- Working Capital
- Franchise Fees
- Equipment Purchase
- Refinancing (Restrictions are in place, and are lender specific)
What CAN’T the funding be spent on?
- Passive real estate investments
- Purchasing an owner's share in the business or reimbursement of owner contributions
- Fund any activities or transactions that are illegal or contrary to public policy
How to apply for SSBCI funding in North Carolina:
To apply for SSBCI funding in North Carolina, small businesses will need to reach out to an approved lender, such as a bank, credit unions, or CDFI. The North Carolina Rural Center is in charge of the funding for the programs, but small businesses cannot apply directly through them. The specific limitations and document requirements for the program will depend on the lender that you choose to work with. It is recommended to reach out and inquire with the lender before applying to understand their specific requirements and what documents you need to provide.
Doing your due diligence to document your business and your application is the key to SSBCI funding success. Be prepared to provide:
- Business plan
- Intake surveys
- Past business tax returns
- Past personal tax returns
- Business debt schedule
Common challenges in applying for SSBCI funding:
When applying for SSBCI funding, there are a few steps you can take to maximize your chances of getting approved. First, make sure that your application is complete and accurate. Additionally, provide as much detail as possible to demonstrate the need for capital. Finally, make sure that you are aware of the requirements for the program and that you are able to meet them.
It is also important to contact your local lenders and venture funds to explore additional financing options. These lenders and funds may be able to provide you with additional capital or guidance that can help you secure the funding you need.
Don't miss out on this opportunity to get the funding you need for your small business in North Carolina.