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Treasury releases guidance for SSBCI TA funds

April 28, 2022
By: Jason Rittenberg

Earlier today, the U.S. Department of the Treasury released information on the $500 million pool of technical assistance (TA) funds authorized as part of the State Small Business Credit Initiative (SSBCI). The agency is allocating $200 million to the states, transferring $100 million to the U.S. Minority Business Development Agency (MBDA), and retaining $200 million at this time. According to guidance released by Treasury, states can use their TA funds for legal, accounting and financial services.

The guidance defines these types of TA services somewhat broadly. In addition to covering licenses, financial statements and financial management, Treasury’s list of example eligible services names several activities that would particularly benefit innovation-focused companies. For example, permissible TA could include assisting with business formation, developing term sheets, or preparing presentations to investors.

States are allowed to provide TA themselves or work with subrecipients or contractors to deliver services. In selecting contractors, states must have a preference for entities that are owned and controlled by socially- and economically-disadvantaged individuals (SEDI). All providers must be able to demonstrate expertise in providing their intended services to their target audience.

The recipients of TA assistance must be SEDI companies or businesses with fewer than 10 employees (“very small businesses”). Further, the state must plan to provide assistance to these companies in roughly the same proportion that the state received SSBCI capital allocations for these groups. For example, if a state has $5 million in SEDI capital and $2.5 million in very small business capital, its TA plan must target SEDI companies for two-thirds of the assistance.

Notably, recipients of TA assistance do not necessarily have to be seeking funds from an SSBCI-backed capital program. States’ TA may target current or former applicants for SSBCI capital programs, as well as other federal, state or local small business programs.

As of this writing, Treasury has not published the amounts allocated to each state. Based on the formula provided in the guidance, it appears that the median amount for a state or territory will be $2.1 million, with a range of about $0.5 million - $25.4 million. Tribal governments collectively are eligible for $14.7 million.

Regarding the funds transferred to MBDA, Department of Commerce Deputy Secretary Don Graves said in a statement that the funds will, “help ensure that more SEDI-owned businesses have the tools they need to succeed at home and abroad.”

This announcement referenced providing TA through MBDA’s network of partners, likely in reference to the agency’s Business and Specialty Centers, and said this TA will have a “particular focus” on equity financing.

Treasury also has not announced its intentions for the $200 million that the agency is holding onto at this time. This amount matches the funding that Congress has proposed to rescind from SSBCI TA funds to help pay for the cost of additional COVID expenses. Presumably, Treasury would cover such a rescission from the amounts that were not announced today.