April 20, 2022
C-Suite Wednesday – $2 Billion in Funding Could be Reallocated from State Small Business Credit Initiative
“There’s a big difference between funds that have not been used and funds that have yet to be deployed,” said Katie Kramer, Vice President of the Council of Development Finance Agencies. The Biden Administration requested more money to fund COVID-19 vaccines, tests, and other necessities, and after a bipartisan deal passed the Senate, the $10 billion legislation could be offset using COVID-19 relief funds.
While most of the $10 billion would come from leftover funds from programs that already ended, the proposal would take $2 billion from a small business program that has not started disbursing its money. The State Small Business Credit Initiative is a long-term aid program supporting small business financing programs at the state level. The initiative was created in 2010 in response to the Great Recession, and President Biden reauthorized the program last March, allocating $10 billion to it.
The program requires governments to match the federal money with private capital, and a $2 billion reduction could cause a $20 billion reduction in private investments for small businesses. Many states already planned what they would do with their funds. In Oregon, they might lose $20 million which reduces the number of businesses they were expecting to help by 300. John Saris, a finance manager at Business Oregon, says, “With these cuts, we will have to totally revamp our plans. Some programs might go away completely – that’s how dire this is.”
Applications from states needed to be submitted in February and tribal governments by May 11, but no applications have received approval or financing from the State Small Business Credit Initiative.
Along with funds from the State Small Business Credit Initiative, $2 billion would be taken from the Shuttered Venues Operators Grant, $900 million from the EIDL Advance program, over $2.3 billion from the Aviation Manufacturing Jobs Program, $500 million from the Higher Education Emergency Relief Fund, and $1.6 billion of unspent funds from the U.S. Department of Agriculture.
After a two-week recess, Congress will address the legislation next week.