Ohio gets funding to leverage private lending to small businesses

The Ohio Department of Development last week announced new funding for a program that will put more than $55 million toward private lending to small businesses and help increase the amount of credit available to them.

The State Small Business Credit Initiative was created by the Small Business Jobs Act of 2010, which provided $1.5 billion to strengthen state programs that support lending to small businesses. Under the SSBCI, states were offered the opportunity to apply for federal funds for state-run programs that partner with private lenders. The Ohio Department of Development received $55,138,373 from the U.S. Department of the Treasury.

“Through Ohio’s SSBCI, we are helping to fill a major challenge faced by Ohio small businesses that seek capital to expand and create jobs,” says ODOD Director Christiane Schmenk. “Ohio’s small businesses are the backbone of our economy and providing them the tools they need to be successful will create a healthier Ohio economy.”

ODOD’s Businesses Services Division will use SSBCI funds for three programs:

Collateral Enhancement Program− a new $33.1 million program that provides banks with cash collateral deposits to use as additional collateral for loans made to eligible small businesses. Under the CEP, ODOD will open an interest bearing account with a lender and deposit up to 30 percent of the loan amount where there is a collateral value shortfall as determined by the lender and ODOD (up to 50 percent of the loan amount for minority-owned businesses or businesses located in a Historically Underutilized Business Zone).

Ohio Capital Access Program− supports small business lending by establishing a “loan guarantee” reserve pool at a lending institution that participates in the OCAP. The program has been increased to $5 million and can provide financing to for-profit and nonprofit businesses that may be experiencing difficulty obtaining business loans using conventional underwriting standards. The state, the lender, and the borrower each pay a small contribution fee into the pool. The reserve pool is available to the participating lender for recovery of any losses on any loan they have enrolled in the OCAP.

Targeted Investment Program− a new $15 million venture that supports the growth and expansion of targeted small businesses within Ohio’s manufacturing, production, and logistics value chains. TIP offers debt instruments tailored to the specific needs of the company at or below market interest rates.

To learn more about the program guidelines and participating lenders, visit ssbci.development.ohio.gov, email [email protected] or call 614-466-5700.