FRANKFORT, Ky. — Gov. Andy Beshear announced Kentucky would receive a $117 million award to expand access to capital for small businesses across the state through the U.S. Department of Treasury’s State Small Business Credit Initiative (SSBCI).
Kentucky will use the award, allocated in three phases over 10 years, to launch a suite of initiatives known as the Kentucky Small Business Credit Initiative 2.0. The funding will support venture capital programs, loan support programs and Community Development Financial Institutions (CDFI), emphasizing access for underserved business owners.
The funding will be distributed through KY Innovation, the Cabinet for Economic Development office responsible for supporting entrepreneurs and small businesses. Qualifying businesses can access support through certified lending institutions for the loan programs and Keyhorse Capital, the Kentucky Science and Technology Corporation (KSTC) venture funding arm for investment capital.
“Back in 2010, Kentucky used these SSBCI dollars to increase loan security and saw tremendous success,” said Monique Kuykendoll Quarterman, executive director of KY Innovation. “These funds enable us to build upon that success by strengthening that loan capital program and investing heavily into our venture capital community. Moreover, we are building a better commonwealth for all by ensuring that all Kentuckians, including those who have historically had difficulty accessing or have outright been denied access to capital, can get the resources needed to make their dreams a reality. It’s a great day for every Kentucky founder and for the future of entrepreneurship in our state.”
The state plans to allocate the award toward areas KY Innovation has identified as lacking within its startup network.
A significant portion of KSBCI 2.0 funding will be allocated toward venture capital, a key area of need for Kentucky startups. In addition to funding more businesses owned by socially and economically disadvantaged founders, Keyhorse will create educational programs to foster a new generation of venture capital fund managers and give them the resources needed to be successful in Kentucky’s growing venture capital community.
Commonly known as SSBCI 2.0, the Treasury Department program was authorized as part of the American Rescue Plan Act and builds upon the 2010 SSBCI initiative. Kentucky used previous funding to create the Kentucky Small Business Credit Initiative (KSBCI), which secures loans by covering gaps between lent capital and posted collateral of up to 20%. This allowed lenders to make loans outside their general purview or guidelines.
Funding will also support two programs intended to make it easier for lending institutions to finance creditworthy businesses needing additional capital. The Kentucky Collateral Support Program (KYCSP) provides a pledged asset of up to 20% of the loan to enhance the collateral coverage of a small-business borrower that would otherwise be qualified but unable to meet the lender’s security requirements.
The Kentucky Loan Participation Program (KYLPP) will also receive a portion of the funding. KYLPP allows the Kentucky Economic Development Financial Authority to purchase up to 20% of a small-business loan to support a lender or CDFI in originating much larger loans that, on their own, would not have been possible.
For both the KYCSP and KYLPP, the state may participate up to 50% if the loan is used to meet the needs of a certified SEDI-owned business, a Very Small Business (VSB) or a Disaster Relief Effected Business locating or planning to locate in the counties declared Disaster Relief Areas by a state or federal agency as of or after Dec. 1, 2021.
The first round of funding is expected within 60 days. For more information about Kentucky’s plan and SSBCI 2.0, visit the KY Innovation site.
Since the beginning of his administration, Gov. Beshear has announced the creation of 43,200 full-time jobs and 828 private-sector new-location and expansion projects totaling $24.6 billion in announced investments.
