Governor, Patt-McDaniel, U.S. Treasury Announce Funding for Ohio to Support $551 Million in Small Business Lending, Creating New Jobs
State Small Business Credit Initiative Critical Component of Small Business Jobs Act President Barack Obama Signed into Law Last Week; Funds Will Help Local Entrepreneurs Expand Their Businesses, Putting More Ohioans Back to Work
Ohio Governor Ted Strickland, Ohio Department of Development Director Lisa Patt-McDaniel and the U.S. Department of the Treasury today announced the allocation of State Small Business Credit Initiative funding for Ohio. The Funds will support $551 million in new small business lending in Ohio through innovative local programs that help entrepreneurs expand their businesses and create new jobs, and are a critical component of the Small Business Jobs Act President Barack Obama signed into law last week to help unlock credit and provide targeted tax cuts for small businesses.
“Small businesses account for more than two-thirds of all jobs in Ohio and more than anything else, what I hear from small business owners is that the greatest impediment to creating jobs is access to capital,” said Ohio Governor Ted Strickland. “We fought hard for federal passage of the Small Business Credit Initiative, and I want to thank the members of Ohio’s delegation, and particularly Senator Sherrod Brown, for their work in support of this legislation. Ohio’s share of the funds will support programs that will help Ohio’s small businesses expand and thrive, particularly manufacturers, those in the auto supply chain and minority businesses.”
“Innovative local initiatives that support small business lending are under extraordinary pressure because of state budget difficulties,” said U.S. Treasury Secretary Timothy Geithner. “These funds will provide vital support to successful state-level programs that help local entrepreneurs obtain the credit they need to put more Americans back to work. President Obama fought hard for the Small Business Jobs Act because it will help ensure that small businesses continue to strengthen our nation’s recovery and serve as critical engines for job creation.”
Under the State Small Business Credit Initiative, states are offered the opportunity to apply for federal funds for programs that partner with private lenders to extend greater credit to small businesses. States are required to demonstrate a minimum “bang for the buck” of $10 in new private lending for every $1 in federal funding. Accordingly, the $55.1 million funding commitment that the federal government will make in Ohio for this program is expected to support $551 million in additional private lending. Nationwide, the program is expected to support $15 billion in additional private lending.
“We are excited to use the more than $55 million in additional resources to reinforce and support the work we are already doing here in Ohio,” Patt-McDaniel said. “Small businesses are critical to Ohio’s economy and we will continue to support our entrepreneurs as they hire new employees and grow their businesses.”
The State Small Business Credit Initiative allows states to build upon existing, successful state-level small business lending programs, including examples such as collateral support programs, Capital Access Programs (CAPs), and loan guarantee programs.
- Collateral Support Programs for Small Manufacturers: Collateral support programs help viable businesses that are struggling to get credit because the value of the collateral they hold has fallen, often due to the decline in commercial real estate values. These programs – which set aside funds to augment collateral the borrower already holds – provide banks greater confidence in extending credit to these borrowers, particularly in some of the communities hardest hit by the economic downturn.
- Capital Access Programs (CAPs): CAPs, which are already up and running in more than 20 states, are loan portfolio insurance programs in which states provide a matching contribution to bank loan loss reserves when lenders extend credit to qualified small businesses. These reserve enhancements allow lenders to expand credit to new borrowers at a time when many of these lenders might otherwise pull back.
- Loan Guarantee Programs: Under loan guarantee programs, states provide partial guarantees on certain small business loans to give lenders greater confidence to extend credit.
If a state does not have an existing small business lending program, officials can establish one in order to access this funding. States must provide plans for utilizing their funding allocations to U.S. Treasury for review and approval.
The amount of SSBCI funds a state is eligible to apply for is determined based upon formulas in the Small Business Jobs Act that take into account each state’s respective unemployment rate and decline in employment relative to other states.
In addition to the State Small Business Credit Initiative, the Small Business Jobs Act includes a number of important provisions to support small business job creation. The Act includes eight new small business tax cuts that went into effect immediately upon becoming law last week; creates a $30 billion Small Business Lending Fund to help small and community banks provide new loans to small businesses; extends and expands existing Small Business Administration loan programs; and delivers other important benefits for small businesses.
>>For more information on the Small Business Jobs Act, please visit link.