Small businesses in cities across the commonwealth will have access to a $117 million award through the U.S. Department of Treasury’s State Small Business Credit Initiative (SSBCI).
Kentucky will use the award in three phases over 10 years to launch a suite of initiatives known as the Kentucky Small Business Credit Initiative 2.0. The funding will support venture capital programs, loan support programs, and Community Development Financial Institutions (CDFI), emphasizing access for underserved business owners.
KY Innovation is an office in the Cabinet for Economic Development responsible for distributing the funds. KY Innovation supports entrepreneurs and small businesses in the commonwealth. Qualifying businesses can access support through certified lending institutions for the loan programs and Keyhorse Capital, the venture-funding arm of the Kentucky Science and Technology Corporation (KSTC), for investment capital.
“Back in 2010, Kentucky used these SSBCI dollars to increase loan security and saw tremendous success,” executive director of KY Innovation Monique Kuykendoll Quarterman said. “These funds enable us to build upon that success by strengthening that loan capital program and investing heavily into our venture capital community.”
The state plans to allocate the award toward areas KY Innovation has identified as lacking within its startup network. A significant portion of KSBCI 2.0 funding will be allocated toward venture capital, a key area of need for Kentucky startups. Funding will also support two programs intended to make it easier for lending institutions to finance creditworthy businesses needing additional capital. The Kentucky Collateral Support Program (KYCSP) provides a pledged asset of up to 20% of the loan to enhance the collateral coverage of a small-business borrower that would otherwise be qualified but unable to meet the lender’s security requirements.
The Kentucky Loan Participation Program (KYLPP) will also receive a portion of the funding. KYLPP allows the Kentucky Economic Development Financial Authority to purchase up to 20% of a small-business loan to support a lender or CDFI in originating much larger loans that, on their own, would not have been possible.
Commonly known as SSBCI 2.0, the Treasury Department program was authorized as part of the American Rescue Plan Act and builds upon the 2010 SSBCI initiative.
Kentucky used previous funding to create the Kentucky Small Business Credit Initiative (KSBCI), which secures loans by covering gaps between lent capital and posted collateral of up to 20%.
The first round of funding is expected within 60 days. For more information about Kentucky’s plan and SSBCI 2.0, visit the KY Innovation site.