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Nearly $202 million in federal funding coming to North Carolina is planned to support small businesses throughout the state through lending initiatives and equity investments in venture capital funds. The NC Rural Center has been allocated this allotment of State Small Business Credit Initiative (SSBCI) funding to continue these programs by the US Treasury Department through the NC State Legislature’s recently passed budget.

This allocation is part of a second round of funding for SSBCI, an initiative first established by the Small Business Jobs Act of 2010 and funded by the U.S. Department of the Treasury that has since been managed by the NC Rural Center, and is now funded through the American Rescue Plan Act (ARPA).

“We are thrilled to be able to continue supporting our state’s entrepreneurs, and the lending partners they lean on, through this allocation from the Treasury,” said Armeer Kenchen, executive director of the Small Business Credit Initiative and CornerSquare Community Capital.

Last week, the NC Rural Center submitted the formal application to the U.S. Department of Treasury detailing plans on how North Carolina intends to use the federal funding. They hope to have a decision from the Treasury Department within 60 to 90 days, Kenchen said. 

The Center will partner with banks, credit unions, CDFIs, and equity fund managers directly to enhance small businesses ability to access the capital they need to grow their business, through three programs – the Capital Access Program (CAP), the Loan Participation Program (LPP), and the NC Venture Capital Program. Small businesses cannot access SSBCI funds directly from the NC Rural Center, but resources for technological assistance and other access resources will be available. 

The Loan Participation Program would support local lenders across North Carolina with $160 million to help expand access to capital for small businesses. By partnering with commercial banks and CDFIs, this program would help small businesses obtain financing to help them grow and expand by providing small business loans with reduced down payments, which helps lenders make loans that are typically outside of their lending guidelines, reducing their risk of exposure. 

The Capital Access Program would work directly with local lenders (banks, credit unions, and CDFIs) to create capital opportunities with $10 million for entrepreneurs who might not otherwise qualify by providing matching loan loss reserves for loans that fall just outside a lending institution’s normal underwriting standards, depositing the funds into a pooled account at the participating institution.

Finally, the NC Venture Capital Program would support early stage high-growth small businesses in North Carolina with $31.9 million, primarily through equity investments by working with fund managers to create equity investment opportunities for startups throughout the state. 

“North Carolina small businesses are at the center of our state’s economic prosperity,” said North Carolina Commerce Secretary Machelle Baker Sanders. “This infusion of capital will help expedite the growth of our innovative entrepreneurs while creating more jobs and enhancing the economic development opportunities in the communities where they operate.”

Under federal guidelines for SSBCI, North Carolina must steer $53.1 million of the federal funding to small businesses that are owned by socially and economically disadvantaged individuals, which is defined by those 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, gender, veteran status, limited English proficiency, physical handicap, membership of a federally or state-recognized Indian Tribe, long-term residence in a rural community, or business enterprises that are located in CDFI investment areas. Another $8.8 million will go to “very small businesses” that employ 10 people or less where the need for more access to capital is particularly high, Kenchen said

The NC Rural Center modeled their SSBCI programs after the aforementioned similar initiative that originated from the Small Business Jobs Act of 2010 using $46.1 million in federal funding that went to loan and collateral support programs for companies hurt by the Great Recession. 

“Since the launch of this program in 2011, we have leveraged almost $1 billion in private funds and have created or retained more than 16,000 jobs throughout the state,” said Kenchen. “We are proud that in the first SSBCI round, the North Carolina program ranked second in the country in amount of private financing leveraged, and third in the country in the number of loans made to businesses owned by women and people of color. This new initiative has the potential to support thousands of small businesses through these proven lending programs, and we’re very excited about the impact that will have on our state and local communities.”

Now that the NC Rural Center has filed their official application for release of these funds, they must wait until it is accepted and processed by the US Treasury Department to begin the program. This federal process is expected to take until the spring, Kenchen says, at which point they anticipate release of the funding to the Center for disbursement to commercial banks, CDFIs, and equity fund managers to support small business loans and investments. The Center will share information on this process and availability through their website, Twitter feed, and newsletters.