The American Rescue Plan includes $10 billion for the new iteration of the State Small Business Credit Initiative (SSBCI). SSBCI is a US Department of Treasury program through which states can access federal funding for small business lending and equity investment programs. 

As states prepare to implement SSBCI programs, we want to share three findings from our work on state incentive programs for entrepreneurs and small businesses. Contrary to popular belief, most state economic development organizations offer several incentive and financing programs for smaller scale enterprises. These programs were often created in response to capital market failures and are usually designed to fill funding gaps and addressing regional disparities in private equity investment. These takeaways are relevant as states prepare to implement new programs to help small businesses as part of an equitable recovery.

Create program rules that broaden access, not constrain it

Our research found that state incentive and financing program rules are often extremely restrictive. When we looked at eligibility guidelines and applications across states, we often found rules so complex they seemed designed to deter participation. Compliance and reporting requirements could be onerous and, occasionally, ridiculous. Early iterations of pandemic assistance also failed to reach many small businesses because rules and requirements excluded many of the businesses the programs were intended to help. States can take this opportunity to design simple application, review, and compliance procedures that only ask for essential information – so they don’t inadvertently recreate the disparities in capital access that programs like SSBCI are supposed to alleviate.  

Devote resources for outreach and promotion to reach intended beneficiaries

Too many state incentive and financing programs have no budget for outreach. After all the effort to craft, fund and open up new programs, agencies often essentially just wait for applicants to discover it. State SSBCI initiatives can do better by improving their online presence to make it easier to find programs; working with their existing small business and entrepreneurial ecosystem partners to get the word out; and, critically, expanding outreach to connect with the businesses that have not been part of those networks in the past. 

The new SSBCI program also includes $500 million for technical assistance, much of which is intended to be used to connect with socially and economically disadvantaged businesses. The Technical Assistance and Best Practices page on the Treasury SSBCI website also offers resources on creating partnerships and improving access to programs in underserved communities. 

Design programs to leverage other resources and initiatives

Incentives are most effective when implemented as part of a broader economic development strategy. Most incentive and financing programs are still fairly small in the context of the entire capital market and small business/entrepreneurial economy. They can create greater impact when they are layered with and leverage other financing and technical assistance programs at the local, state and national levels. SSBCI funds should not be treated at standalone initiatives, but intertwined with existing small business support and entrepreneurial ecosystems to magnify their impact. 

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