A little-known program within the American Rescue Plan, the $1.9 trillion stimulus package President Biden signed into law on March 11, could bring millions of dollars of fresh capital to startups and small businesses in Maine.

As part of the stimulus package, the federal government will distribute $10 billion to states to increase access to capital for businesses. The funds represent a reauthorization of the original $1 billion State Small Business Credit Initiative (SSBCI), which Congress originally approved in 2010.

Maine will need to apply for the funds, which will be provided in two tranches. Factors that will determine how much Maine receives include the state’s 2020 unemployment rate and how the state plans to use the funds to support socially and economically disadvantaged businesses, tribal governments, micro-businesses, and technical assistance for program administration.

The Department of Economic and Community Development (DECD) is currently working with the Finance Authority of Maine (FAME), the Maine Venture Fund, and regional economic development agencies on Maine’s application and program structure. The U.S. Treasury will inform Maine of its appropriation by April 11, according to the Council of Development Finance Agencies (CDFA), the nonprofit association that lobbied for the program’s refunding.

Based on Maine’s $12.7 million from the first round of the SSBCI program, the state could expect to be eligible for up to $127 million from the new funds.

Heather Johnson, commissioner of the Maine Department of Economic and Community Development, was encouraged to see a reauthorization of SSBCI included in the federal relief package.

“The program will provide much needed capital and can build on lessons learned when it was available and successfully deployed in Maine previously,” Johnson said. “We look forward to working with FAME and other partners to structure the program to make funds available to as many of Maine’s businesses and entrepreneurs as possible under the federal rules of the program.”

SSBCI 2.0 is a 10-year program with the expectation that the states will leverage the federal funding 10:1, meaning for every $1 invested from the federal program, states need to demonstrate an additional $10 is invested in eligible businesses throughout the life of the program. While this is a high bar, the leverage requirement includes the recirculation of funds from successful investments.

This reuse of funds is a key aspect of the program that makes it particularly exciting, according to Carlos Mello, acting CEO of FAME. Programs that properly deploy the SSBCI funding and receive a financial return are able to keep the funds for continued use.

During the SSBCI 1.0 program, Maine received $12.7 million which was invested in Maine business through three programs: the Regional Economic Development Revolving Loan Program ($4.8 million), the FAME Direct Loan Program ($2.9 million), and Maine Venture Fund ($5 million).

The original funds went to 100 different small Maine companies (20 employees or less) in the form of loans or equity, according to Mello. As of June 2019, the $12.7 million was leveraged $1 to $7.16, meaning that companies that received SSBCI funds garnered an additional $90.9 million of capital. Mello reported that FAME expects the current leverage number is higher due to the recirculation of funds as described above.

Maine Startups Insider will continue to follow the development of Maine’s SSBCI program and its impact on the state’s business community.