Manufacturing has long been a staple of America’s economic engine even with recent employment declines. Today, the sector is seeing a strong resurgence due to private investment in new industries and products, public investment in R&D and business development assistance, and credit support through such programs as the State Small Business Credit Initiative (SSBCI). A new report, The State Small Business Credit Initiative and Rebuilding the U.S. Manufacturing Base, discusses the sector’s revival and the importance of SSBCI in supporting its growth. CREC contributed to this report and this blog highlights some of the report’s key findings.
The American Rescue Plan Act (ARPA) reauthorized and expanded the State Small Business Credit Initiative (SSBCI) which was originally passed as part of The Small Business Jobs Act of 2010. Through SSBCI, state and territories provide credit enhancements to small businesses through equity/venture capital programs, loan participation programs, loan guarantee programs, collateral support programs, and capital access programs tailored to local market conditions, and all designed to support private financing. The new SSBCI provides $10 billion to support small businesses and empower them to access the capital needed to invest in job-creating opportunities.
SSBCI has proven to be a powerful supporter of manufacturing growth. The first SSBCI supported more than 21,000 loan or investment transactions and nearly $11 billion in private investment for manufacturers. These deals ultimately created or retained 240,000 manufacturing jobs.
States are using the new SSBCI funds to support manufacturers and have designed loan participation, collateral support, loan guarantees, capital access and equity investment programs to provide the credit and investment enhancement needed to facilitate private financing. The report highlights some uses of SSBCI by selected states:
- Reducing Lender Risk for Smart Technology – Fixed Asset Lending. Iowa, Minnesota, and West Virginia are among the states that create programs that focus on helping manufacturers modernize their operations with cutting edge technology.
- Expanding Access to Working Capital. Traditional financial institutions often have a difficult time providing working capital to small manufacturers. Many states including North Carolina, Michigan, Oregon, and Washington are using SSBCI to support working capital financing.
- Expanding Opportunity for Underserved Groups. The report notes how Washington, New York, Pennsylvania, Vermont, and Hawaii have created programs that focus on increasing access to capital for traditionally underserved small businesses and entrepreneurs. Community Development Financial Institutions (CDFIs) are often key partners in this financing space.
- Improving Flexibility Regarding Allowable Uses of Loan Proceeds. With a rapidly changing manufacturing sector, flexible programs are key to success. Arizona, Illinois, Pennsylvania, and California are five states that have incorporated flexibility in their program designs to better meet borrower needs.
- Investing in Innovation/Start-Up Funding – Equity/Venture Capital Programs. Several states recognize the importance of equity/venture capital programs in the funding of early-stage manufacturers. Michigan, New York, and Hawaii are among the states that have developed venture capital programs geared toward the needs of manufacturers.
Manufacturing remains an essential component of the American economy. Do yourself a favor and check out this important report that underscores the importance of manufacturing and how SSBCI is playing a critical role in supporting the sector’s growth in urban, suburban, and rural locations for all Americans.