Billions in federal funds are heading to businesses in 2025. Here’s how to get a slice (Courtesy of the Jacksonville Business Journal) — In October, volunteer management-solutions firm Bugle announced a new equity investment from InvestTN as part of its seed round.
InvestTN, a $70 million fund managed by the state, makes venture investments in Tennessee-based early-stage companies. Money in the fund comes from the U.S. Treasury Department’s State Small Business Credit Initiative (SSBCI), which was authorized by the American Rescue Plan Act of 2021. It allocated $10 billion for states, territories and tribal governments to set up their own programs to help small businesses access capital. The aim is to leverage that initial $10 billion into $100 billion.
Bugle is not alone. Billions of dollars are headed to small businesses in 2025 in the form of loan guarantees and direct investments. It’s among the last of the Covid-19 era small-business support programs that are still pushing money out the door.
So far, about $8.3 billion of the $10 billion has been allocated to state and local governments. Of that, $3.1 billion has been disbursed by the Treasury Department, according to data from the second quarter of 2024, the latest data available from the Treasury Department.
About $1.7 billion so far has been spent, obligated or transferred to lenders and small businesses. That’s about a 19% increase over the prior quarter.
California and Florida have deployed the most money in absolute terms but Montana, Vermont and Maine have deployed the most money as a percentage of their allocation.
States and other jurisdictions have been using much of the money for direct investments in companies, either through a state-backed venture firm or through a third party. That includes:
- A $200,000 investment in sustainable paper product firm Bim Bam Boo from Groove Capital, a SSBCI-supported venture-capital fund participating in Minnesota’s Multi-Fund Venture Capital Program
- A $250,000 investment in international relationship-management startup Grovara from Ben Franklin Technology Partners of Northeastern Pennsylvania, through an SSBCI-supported direct venture-capital program in partnership with the Commonwealth of Pennsylvania’s Department of Community and Economic Development. This investment was matched by an additional $250,000 in private investment.
Of the $8.3 billion in allocated funding going to 257 programs, about 64% are being used to support loans, whether through loan-participation programs, loan guarantees or collateral support. About 36% went to investment programs, and nearly half of that went to direct equity capital programs, according to the Treasury Department report.
In a separate November report by the Treasury Department, the agency found, so far, the $750 million in funds expended by the end of 2023 resulted in about $3.1 billion in new financing.
The report also found:
- 75% of all transactions supported underserved businesses; 40% were reported as supporting minority-owned businesses and 31% for women-owned or -controlled companies.
- 78% of all transactions supported very small businesses, or ones with fewer than 10 employees.
- As much as 9% of transactions supported companies in rural communities.
- Over 31% of participating lenders are Community Development Financial Institutions (CDFIs) and 51% are community banks embedded in their communities.
What’s next for the program
While small business are getting access to funds, the Government Accountability Office in a June report said there is more the Treasury Department could do to speed up the process.
It’s not the first time the GAO has suggested increased activity. Last year, the GAO recommended the agency incorporate best practices in project management, and the agency began using a project-management tool to help track projects. Still, the agency could better analyze staff availability and workloads in order to make the program more efficient, the GAO said in its most recent report.
As of the end of 2023, the Treasury Department’s application-review times ranged from about two months to 20 months, with a median review time of seven months. But some of that was because state and local governments did not fully understand certain program rules and requirements.
Small-business owners can look up their own state and local programs to find out if they qualify for funding. Business owners should also reach out to their local CDFI, small-business development center or other business association to find out more information. The SSBCI program is set to run through at least 2030.