Funding Success and Equity

HOW DELAWARE’S NEW SSBCI FUNDING PROGRAM BENEFITS BOTH SMALL BUSINESS BORROWERS AND THEIR LENDERS BY PROVIDING ACCESS TO CAPITAL

BY ANDREW HARTON

One of the biggest challenges for Delaware’s small businesses, and particularly those in underserved areas, is a lack of access to funding to start or expand their business.

The Delaware Division of Small Business (DSB) is helping to address that through $60.9M in federal funding from  the U.S Treasury’s State Small Business Credit Initiative (SSBCI). This is the federal program’s second installment of SSBCI, having learned valuable lessons from its first round in 2010.

The funds provide incredibly flexible lending tools for financial lending institutions to help support small businesses in the state, reduce their lending risk, and expand community outreach.

The goal of SSBCI-funded initiatives is to support small businesses, particularly those that are owned by socially and economically disadvantaged individuals.

DSB is offering two programs through SSBCI that benefit both lenders and small business owners. The Division is actively searching for lenders to participate.

The Delaware Loan Participation Program (DELPP), and Delaware Capital Access Program (DECAP) make funding available to financial lending institutions such as banks, credit unions, other lenders, or fund managers. Small business owners will apply to their lender for these programs, and the lenders will work with the Division to secure the funds. Here are descriptions of each program:

DELPP: When a lending institution may not cover the full amount of the requested loan, the lender may ask DSB to assist. DSB will participate in the loan as a supporting lender, and the lender’s rate will be blended with the DSB rate, resulting in an overall lower interest rate for the business owner. The business owner receives a lower interest rate and the lender’s risk is reduced by not having to cover the full amount of the loan.

DECAP: This program requires the borrower and lender to make a onetime premium payment (matched with SSBCI dollars) into a bank account (Reserve Fund) that the lender can then use as additional collateral on the loan. It’s a valuable tool for lenders to make business loans that may not normally qualify for a conventional bank loan.

In September, Del-One Federal Credit Union (FCU) was the first financial institution to sign on as a participating lender. Del-One was excited to join the program and moved quickly to secure the partnership.

“Del-One Federal Credit Union is focused on empowering our communities by helping small businesses develop and grow,” said Del-One FCU’s Chief Lending Officer John Chartrand. “We are proud to be a participating lender in the State Small Business Credit Initiative as we know this will help to further our mission of enriching the lives of our small business member-owners and community.”

Information about all of the SSBCI programs can be found at de.gov/ssbci. Small business owners are encouraged to ask their lender if it is signed up for the SSBCI program, and how the program can help them support their business needs. Lenders are encouraged to visit the website and then reach out to business_finance@delaware.gov with additional questions or to sign up.

Andrew Harton is the business finance director at the Delaware Division of Small Business.