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State Small Business Credit Initiative

State Small Business Credit Initiative

Created as part of the Small Business Jobs Act of 2010, SSBCI was designed by the federal government to help states strengthen existing loan and equity programs and/or create new programs that support financing small businesses. Florida received a total SSBCI allocation of $97,662,349.

The primary objective of Florida’s SSBCI Program is to leverage private capital for Florida’s small businesses, which are defined as businesses with 500 employees or less. After five years, Florida must show that taken together, $10 in new small business lending or investment was generated by every $1 in SSBCI funding. Therefore, Florida’s SSBCI Program is anticipated to generate at least $976,623,490 in new private capital for Florida’s small businesses

SSBCI Loan Participation programs

The Loan Participation Program is available to qualified businesses that demonstrate adequate historical and/or proposed cash flow coverage and other credit underwriting metrics. However, these transactions will be undertaken to help mitigate any perceived credit weaknesses by the Partnering Lender.

I am small business seeking financing. Can I apply directly to EFI for a loan or a grant under the SSBCI Program?

No. The SSBCI program does not offer grants or direct loans. It provides loans and/or loan participations to commercial lenders, credit unions and Certified Development Finance Institutions (CDFIs) that extend credit to small businesses in Florida.  If you are pursuing financing for a small business, you should contact a local lender in your area and discuss your financing needs and, if needed, apply for a small business loan.

What is an SSBCI Loan Participation?

An SSBCI Loan Participation permits the purchase of a portion (up to 50%) of the loan originated by the lender, facilitating the loan by reducing the lender’s credit risk. The following are the typical terms:

  • Typical loan participation will be between 5-20% of the loan amount, up to a maximum 50% (1:1 min)
  • Minimum $250,000 loan amount; maximum $5,000,000 (lower amounts permitted)
  • Maximum participation term is five (5) years.
  • Interest rates and fees are negotiable.
  • Under no circumstances will a loan participation be permitted under a scenario that allows the Partnering Lender to incur less than 20% risk of loss (based on the total required financing).

The most common Loan Participation is the 504 Bridge Loan Participation. These transactions will be processed by Florida First Capital Finance Corporation (FFCFC), working in conjunction with Enterprise Florida.

With SBA 504 Loans, lenders are permitted to finance equipment and owner-occupied real estate purchases up to ninety-percent (90%) of the total project cost. The lender makes such a loan with the expectation that the portion above 50% will be “taken-out” by a SBA note. However, there is often a timing difference between initial closing and that take-out. The 504 Bridge Loan Program will address this timing difference. Therefore, by removing this interim 90% financing risk for lenders, the 504 Bridge Loan Program makes more capital available for Florida’s small businesses.

  • Typical loan participation is 100% of second mortgage note
  • Minimum $250,000 loan amount; maximum $5,000,000. Transactions for smaller amounts will be considered on a case-by-case basis.
  • Typical term between 3 to 18 months (until SBA take-out)
  • Fee is typically .50% of participation (1.00% if ground-up construction)
  • Any Certified Development Company (CDC) can participate – FFCFC reviews CDC underwriting for compliance on behalf of EFI.
  • Under no circumstances will a loan participation be permitted under a scenario that allows the Partnering Lender to incur less than 20% risk of loss (based on the total required financing).

What uses of funds are eligible?

The loan proceeds must be used for a “business purpose.” A business purpose includes, but is not limited to, startup costs, working capital, business procurement, franchise fees, equipment, inventory, as well as the purchase, construction renovation or tenant improvements of an eligible place of business that is not for passive real estate investment purposes.

What uses are ineligible?

  1. Loan proceeds may not be used for holding passive investments such as commercial real estate ownership, or the purchase of securities; and lobbying activities; or
  2. Loan proceeds may not be used to repay delinquent federal or state income taxes unless the borrower has a payment plan with the relevant taxing authority; or
  3. Loan proceeds may not be used to repay taxes held in trust or escrow, e.g. payroll or sales taxes; or
  4. Loan proceeds may not be used to reimburse funds owed to any owner, including any equity injection or injection of capital for the business’ continuance.
  5. Loan proceeds may not be used for transfer of ownership or business acquisition (purchase of “Goodwill”). However, if the transaction is structured strictly as an Asset Purchase, supported with a purchase contract describing the tangible assets being transferred (real estate, equipment, inventory, etc), and there is valuation that supports the asking price (with no amount attached to goodwill or business value), the transaction might be deemed eligible.
  6. A loan originated to place under the protection of the approved state program prior debt that is not covered under the approved state program and that is or was owed by the borrower to the lender or to an affiliate of the lender.
  7. A loan originated to refinance a loan or investment previously made to that borrower by the lender or an affiliate of the lender.

What types of lenders can use the program?

Eligible lenders include any insured depository institution, insured credit union, or community development financial institution (CDFI), as those terms are defined in section 103 of the Riegle Community Development and Regulatory Improvement Act of 1994 (12 USC 4702)

For additional information for lenders click here.

What borrowers are eligible?

  1. Borrowers must be Florida businesses (or businesses locating in Florida).
  2. Borrowers must have less than 500 employees on average; 750 employees maximum.
  3. Borrowers must have an identified Partnering Lender providing new private capital. Borrowers seeking funding based on prior loans or equity investments are ineligible.

What borrowers are ineligible?

  1. Borrowers may not be businesses engaged in speculative activities that develop profits from fluctuations in price rather than through normal course of trade, such as wildcatting for oil and dealing in commodities futures, unless those activities are incidental to the regular activities of the business and part of a legitimate risk management strategy to guard against price fluctuations related to the regular activities of the business.
  2. Borrowers may not be businesses that earns more than half of its annual net revenue from lending activities; unless the business is a non-bank or non-bank holding company Community Development Financial Institution; or
  3. Borrowers may not be businesses engaged in pyramid sales, where a participant’s primary incentive is based on the sales made by an ever-increasing number of participants; or
  4. Borrowers may not be businesses engaged in activities that are prohibited by federal law or applicable law in the jurisdiction where the business is located or conducted. (Included in these activities is the production, servicing, or distribution of otherwise legal products that are to be used in connection with an illegal activity, such as selling drug paraphernalia or operating a motel that knowingly permits illegal prostitution); or
  5. Borrowers may not be businesses engaged in gambling enterprises, unless the business earns less than 33% of its annual net revenue from lottery sales; or
  6. Borrowers may not be businesses where the principal of the company has been convicted of a sex offense against a minor; or
  7. Borrowers may not be businesses where the Borrower is an executive officer, director, or principal shareholder of the Partnering Lender or member of the immediate family of an executive officer, director, or principal shareholder of the Partnering Lender(s).

We are a Community Development Financial Institution (CDFI) in Florida. How can we participate in the program?

Community Development Financial Institutions (CDFIs) are eligible lenders as well as eligible borrowers under the SSBCI program.

CDFIs as eligible lenders that receive credit support: CDFIs may enroll transactions in the state’s lending programs just like traditional banks.

CDFIs as eligible borrowers of SSBCI funds: Non-depository CDFIs are eligible borrowers under the program. This provision allows a financial institution to lend to a CDFI with SSBCI support to provide CDFIs with funds, or increased capacity to do small business loans.

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Veronica Valdez VP, MaSBEC 407-956-5643
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