Peters and Treasury Secretary Lew Highlight Success of State Small Business Credit Initiative (SSBCI) At New Center Stamping in Michigan

Detroit, MI – Today, U.S. Representative Gary Peters announced a new measure, the Small Business Access to Capital Act, legislation aimed at securing the future of his successful State Small Business Credit Initiative. At an event at New Center Stamping, a local small business that has utilized SSBCI funds to increase their output and staff, Peters was joined by Treasury Secretary Jacob Lew to highlight the success of the State Small Business Credit Initiative in Michigan and encourage the new phase of the program.

Peters authored the Small Business Credit Initiative (SSBCI) that was included in the 2010 Small Business Jobs Act. SSBCI leverages significant private capital with targeted federal investments to fund programs that support small businesses and small manufacturers. Peters’ measure provides additional allocations for states to be able to continue this critical and proven initiative that has spurred investment in small businesses across Michigan, creating jobs and strengthening the middle class. Peters worked closely with small businesses for input on the SSBCI program and how to best implement the next phase of the program.

Peters said, “Small business success is vital to middle class success, and Michigan’s future depends on us making the right investments in our state’s small businesses now. The State Small Business Credit Initiative has been a proven success, helping small businesses get the investment they need to get off the ground and grow. I am proud to introduce the next phase of the program, which will continue to create thousands of jobs for middle class families both in Michigan and across the country. This small business measure is the kind of targeted investment we should be making in our small business job creators."

Peters’ new bill provides an additional round of formula funds based on the 2010 model and also provides $1 billion for a new, competitive pool of funding for which states and consortiums of states may apply. The bill also incentivizes timely job creation by creating an incentive for states to put existing resources under the 2010 law to work by recapturing any funding from the Small Business Jobs Act that is not used by June 30, 2015.  Recaptured funds would be competitively awarded to states.

SSBCI has resulted in $79 million in lending in the state of Michigan alone to fund innovative small businesses that are creating good paying, U.S. jobs. Michigan also leads the nation in SSBCI funds deployed and is in the top five in the percentage of SSBCI allocations that are expended in the state. New Center Stamping, a metal stamping business in Detroit, has received $3.7 million in funding from the Treasury Department’s State Small Business Credit Initiative.  These SSBCI funds were used to backstop a $7.5 million loan which the company said has saved existing jobs and will allow it to expand its workforce.  

New Center Stamping COO Gregory Smith said, “By utilizing SSBCI funds offered by MEDC, New Center Stamping has just completed a $10 million expansion of its stamping capacity, creating 60 new jobs in the city of Detroit. This type of investment has made our expansion possible, and business leaders like myself are seeing how pro-growth, small business policies are positively impacting our city and state.”

Peters is an outspoken champion for Michigan small businesses in Washington. He is co-chair of the Congressional Caucus on Innovation and Entrepreneurship, and before entering public service, Peters worked as a successful businessman. In Washington, he has focused on hearing the concerns and ideas of Michigan small business owners and entrepreneurs. Peters helped write the Small Business Jobs Act to expand credit to Michigan small businesses and help them grow and create jobs.

Background

PETERS LEADS THE WAY

In September 2009, U.S. Rep. Peters was the first Member of Congress to call for the creation of a lending fund for smaller lenders, publishing an op-ed in The Hill on the need to spur more small business lending through community banks (Click here to read that op-ed). In November 2009, U.S. Rep. Peters convened a field hearing of the House Financial Services Subcommittee on Oversight and Investigations in Michigan to hear directly from small businesses and community banks about the need to spur small business lending and strategies for doing so.  (Click here for more information on that hearing). Following that field hearing, U.S. Rep. Peters authored a letter signed onto by other Members of Congress calling for the Treasury Department to undertake solutions advocated by witnesses at the hearing, including partnering with community banks to spur small business lending.  (Click here to view that letter).

In January 2010 President Obama announced in his State of the Union address that he was calling on Congress to pass legislation redirecting funding away from the Troubled Asset Relief Program (TARP) and using it to help spur small business lending (Click here for Peters’ statement). In September 2010, just one year from the time U.S. Rep. Peters called for the creation of a small business lending fund, the Small Business Jobs Act was signed into law.  The bill was authored in the Financial Services Committee, of which Peters is a member. President Obama wrote Peters, thanking him for his “leadership” on the Small Business Jobs Act of 2010, hailing it as “the most significant step on behalf of our small businesses in more than a decade.” This new Treasury report further underscores how successful this program has been.

SUCCESS OF SSBCI IN MICHIGAN AND ACROSS THE COUNTRY

Since 2010, the U.S. Department of the Treasury awarded almost $1.5 billion to fund programs that support small businesses and small manufacturers. To qualify for SSBCI support, small businesses must use the federal funds to leverage private capital.  The program is expected to help spur up to $15 billion in new private sector lending or investment in small companies by leveraging $10 in private capital for every dollar of federal support by the program’s end. SSBCI capitalizes on working relationships between states and small business lenders and investors.  Under SSBCI, states design programs that best respond to local economic conditions and priorities.

Broad range of industries: SSBCI financing has reached small businesses in a diverse range of industries including retail trade, manufacturing, hospitality, and many types of services.

Support targeted to small business: About two-thirds of all SSBCI loans or investments were for less than $100,000, and the average SSBCI loan or investment size about $319,000. Small businesses with fewer than 50 employees received 96% of SSBCI loans, and 80% of the borrowers employed 10 or fewer employees. 

Investment in LMI areas: Companies in low- and moderate-income areas have received 42% of the SSBCI loans.

Proven job creation: SSBCI has helped small businesses create or save 53,000 jobs, including over 6,000 jobs in Michigan.  Over 500 loans have been made in Michigan, leveraging more than $370 million in private capital. SSBCI has already reached 4,600 U.S. small businesses totaling $1.9 billion in lending support.

Strong involvement by community banks and CDFIs: Community banks have made nearly 60% of the dollar volume of SSBCI-supported loans. Community banks and Community Development Financial Institutions (CDFIs) together accounted for 87% of the number of these loans.

Support for fast-growing startups: Half the total dollars loaned with SSBCI support have gone to companies no more than 5 years old, which disproportionately contribute to net job creation.

NEED FOR LEGISLATIVE ACTION

States are reaching the end of their allocated capital: Many states have had such success in finding qualified small business borrowers and private sector leverage that their funding allocations are almost completely deployed.  As of the end of 2013, fourteen states had already expended, obligated, or transferred 70% or more of their funds.

Potential to “evergreen” innovative state lending programs: With an additional infusion of capital, a number of successful state small business lending programs could continue not just for the next 2-3 years, but for decades.  Interest on loans made since SSBCI’s creation and those funded by an additional federal tranche of capital would finance new loans to be made for years to come.

THE SMALL BUSINESS ACCESS TO CAPITAL ACT OF 2014: HOW IT WORKS

Additional round of formula funds: Provides an additional $500 million that would be allocated to states in the same ratio as the Small Business Jobs Act of 2010 after they have obligated 80% of their third and final tranche of formula funding under the 2010 law.

New competitive pool of funds: Provides $1 billion for a new, competitive pool of funding for which states and consortiums of states may apply. Criteria for Treasury consideration include job creation; leverage of private capital; serving new companies; serving LMI areas; robust accountability measures; and matching funds provided by applying entities. States that did not participate in the initial SSBCI program are still eligible to apply for competitive funding.

Incentivizing timely job creation:Creates an incentive for states to put existing resources under the 2010 law to work by recapturing any funding from the Small Business Jobs Act that is not used by June 30, 2015.  Recaptured funds would be competitively awarded to states.

Senate companion: Senators Jeanne Shaheen and Debbie Stabenow will be introducing the Senate companion.

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