State Small Business Credit Initiative 2.0 Loan Participation Program

Since 2012, Business Development Corporation of SC (BDC) has operated a State Small Business Credit Initiative (SSBCI) Loan Participation Program (LPP) with the South Carolina Jobs-Economic Development Authority (JEDA). Although the official U.S. Treasury program ended in 2017, BDC has continued to operate the LPP in substantially the same manner as the Treasury program.

On July 18, 2022, the U.S. Treasury announced South Carolina’s new State Small Business Credit Initiative program (SSBCI 2.0). South Carolina, approved for up to $101.3 million, will operate a loan participation program to which it has allocated $50 million and a venture capital program to which it has allocated $51 million.

The LPP will expand access to capital for underserved communities by utilizing a significant percentage of the funds for underserved small businesses and by earmarking $10 million of the funds to assist the state’s CDFIs with loan participations.

The venture capital program will expand access to capital for underserved communities by leveraging relationships with partner organizations to identify small businesses in underserved communities and investing in venture capital funds that target underserved businesses and rural areas of South Carolina.

We recently interviewed State Treasurer Curtis Loftis, JEDA Executive Director Harry Huntley, and BDC President Peter Shand to find out more about the state’s recent $100 Million award for SSBCI funding.

Curtis Loftis Treasurer Of South Carolina

We know how important our state’s banks are to the economic recovery from the effects of the pandemic. What impact will the new SSBCI 2.0 program have in regard to job creation and helping businesses in South Carolina grow and expand?

We estimate that 3,286 jobs will be created and 9,289 jobs will be retained in the state of South Carolina through the SSBCI 2.0 Loan Participation Program. The benefits to the state will be numerous, and will likely include:

• Assist small businesses in the recovery from the economic effects from the COVID pandemic, with a special focus on underserved small businesses;

• Increased income tax revenue for the state, from an increase in the number of employed persons;

• Increased sales tax revenue, as employed persons increase their spending on goods and services and create new households;

• Lower cost of unemployment insurance payments, as more people are employed;

• Better overall economy, as more people working leads to higher spending, much of which improves the health of the business community.

How will this program help the underserved businesses in the state?

The LPP is specifically designed to expand economic opportunities, including for historically underserved borrowers. The program will allow bank lenders to approve more loans for borrowers who would not normally qualify for the loan they are requesting. In addition, the low equity requirement will allow borrowers to preserve capital for other uses. Low equity requirements are very important for historically underserved borrowers, who frequently have not had an opportunity to accumulate the capital needed for equity requirements in standard bank loan transactions.

BDC’s current LPP has had great success in lending to historically underserved borrowers, as evidenced by its 69% CDFI tracking rate since the program began ten years ago. BDC anticipates having at least a 69% level of CDFI eligible loans using SSBCI 2.0 funds, although BDC will endeavor to increase the impact by partnering with other CDFIs in the state. To strengthen our state CDFIs’ ability to make SSBCI loans, BDC will earmark $10 million of the $50.3 million in SSBCI 2.0 funding specifically for SC CDFI lenders. BDC itself is a CDFI, and already has relationships with several CDFI lenders in the state that are able to make LPP loans, including Security Federal Bank and Optus Bank.

Explain how this new SSBCI 2.0 program is different than the original SSBCI program in regard to how it impacts businesses and the state in general.

The primary distinction between the two programs is that there is an increased emphasis on reaching underserved small businesses. Since the minimum participation size has been lowered, smaller loans can be considered and the increase in funding means we can assist a much larger number of small businesses.