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 Remarks of Counselor to the Secretary Antonio Weiss before the State Small Business Credit Initiative National Conference


5/12/2015

 

As Prepared For Delivery
 
WASHINGTON - Thank you.  I am privileged to be with you today and honored to join Comptroller Curry in welcoming you to the fifth SSBCI national conference.  We are here today to celebrate a program that has supported the growth of small businesses, and the economy, in communities across America.  Comptroller Curry, the work that your community affairs team has done to support SSBCI is a great example to us all of thoughtful cooperation and coordination among federal offices.  Thank you and Deputy Comptroller Wides for your tireless work and for hosting us today.
 
I want to begin by recognizing the people who have been instrumental to SSBCI’s success - first and foremost, the architects of the program, former Assistant Secretary Michael Barr, who will be joining us and address the group over lunch, as well as Don Graves and Cliff Kellogg, who stood up the program five years ago.  I would also like to thank Amias Gerety, Jessica Milano, and Jeff Stout for their continued leadership and the twelve-person Treasury team for making this program so effective every day.  Most importantly, bringing this program to small businesses is in the hands of those here in the audience; I want to thank you personally for the work you do and encourage you to continue your dedication to making this program work.
 
Today, I will highlight three topics: first, how SSBCI is helping so many entrepreneurs and small business owners achieve their dreams; second, why we must continue to make smart investments in small businesses through programs like SSBCI to maintain economic recovery and accelerate job creation; and, third, the importance of the President’s plan and budget proposal[1] to extend SSBCI for another seven years with $1.5 billion in fresh funding.
 
First, let’s take stock of the current dynamics of our economic recovery.  It's remarkable how far we’ve come since September 2010, when the Small Business Jobs Act first authorized SSBCI as well as the Small Business Lending Fund, or SBLF.  During the financial crisis, small businesses were severely constrained in terms of access to capital and credit.  Through the course of recovery, SSBCI and SBLF have collectively resulted in $21.5 billion of additional capital for America’s small businesses.[2]  By enhancing small business access to credit and capital, these two programs have boosted the economic recovery.
 
Today, the strength of our small businesses is more critical than ever as we seek to make sure the benefits of our continued economic recovery reach more Americans.  Small businesses play an outsized role in providing the high-quality, higher-paying jobs America needs today, employing fully half of our country's private sector workforce.[3]  And they are the largest single source of new job growth.[4]  Over the last two decades, small and new businesses have been responsible for creating two out of every three new jobs.[5]  All of us here understand that it is impossible to have a conversation about creating jobs and sustained economic growth in America without seriously pursuing solutions to support our entrepreneurs.
 
However, the need to increase small business access to capital and credit remains.  Quite simply, in order to start, grow, and expand their businesses, entrepreneurs need capital.  While our capital markets work well for most established, large- and mid-sized businesses, they are not suited for all businesses.  For example, small, early-stage, rural, minority-owned, and women-owned businesses often require the customized approach of community banks, credit unions, and community development financial institutions, also known as CDFIs.  Even then, as you well know, these key employers still have difficulty qualifying for financing.  Through programs like SSBCI, SBLF, and the CDFI Fund, Treasury has made progress in closing that gap, having played a central role in bolstering local economies across the country by supporting investments in small businesses.
 
SSBCI is the only federal program of its kind.  The initiative partners federal resources with state expertise to deliver capital to small businesses in response to local economic and market conditions.  It is not a one-size-fits-all program.  For some communities, this means targeting micro-businesses; for others, it means targeting manufacturers or high-tech companies.  Each state has its own needs and, with them, a unique set of partners to administer the programs.
 
To date, the program has resulted in $6.4 billion of increased capital to local businesses, more than $7.40 leveraged for every $1 of federal subsidy.[6]  It has produced new loans and investments to more than 12,400 businesses.[7] Collectively, these small business owners have reported that more than 142,000 jobs will be created or retained from SSBCI loans or investments.[8]  
 
Let me share with you two examples that illustrate what I mean by that.  First, there is the case of individual businesses that have benefited from credit support or an investment.  Take, for instance, Artur Ryabtsev, a Ukrainian refugee who immigrated to the United States in 2008, and drew upon the skills he learned at a Kiev furniture factory to open a successful custom cabinetry business in his Sacramento garage.  Today, he has five employees – and orders are increasing — thanks to a $4,600 loan from California’s Capital Access Program.  CalCAP provided matching funds to Opening Doors, a Sacramento CDFI that lends to refugees to start or expand their businesses. Mr. Ryabtsev has said he would never have been able to achieve his great success without Opening Doors.[9]
 
Another example is New Center Stamping, a Detroit-based company, which stamps out hoods, fenders, doors and roofs for the Detroit auto makers.  New Center was able to save 130 jobs and add 65 new jobs to the economy with a multi-million dollar loan through the SSBCI collateral program to upgrade equipment and expand their building.  New Center’s president asserted that “without this investment, it would have been a slow decline to wrapping up and shutting the doors.”[10]
 
At Treasury, we are also inspired by the work SSBCI investment programs are doing to help secure early rounds of financing for high-potential businesses that happen to be located outside the major markets for venture capital.  It stands to reason that effective entrepreneurs live among us all over the country and shouldn’t need to migrate to the coasts to fund and establish businesses.  For example, in Madison, Wisconsin, 60 miles from where my grandfather started his own small business, a lumberyard, NeuWave Medical received a $300,000 investment from Wisconsin’s Fund of Funds program, and eventually raised $14 million of venture capital to develop minimally invasive tools for surgery.  Companies like NeuWave show that investing in the entrepreneurial ecosystem and in local start-ups is good economic development policy.
 
Another type of story we’ve heard is about the partnerships and capacity-building propelled by SSBCI.  Illinois, for instance, has developed an effective partnership to expand the lending capacity of the Rockford Economic Development Corporation, thereby bringing capital to an area that was particularly hard-hit by the recession.  Similarly, Washington State partnered with the Center for Commercialization at the University of Washington to invest in technology emerging from the state’s research universities.
 
These partnerships all tell two important things.  First, under SSBCI, states are empowered to tailor funding according to local needs and direct it through private sector partners.  Second, this proven model and the foundation you have laid with these private sector partners, financial institutions, and other intermediaries would be wasted if funding were simply to disappear.  This is why Treasury strongly supports the President’s proposal to extend SSBCI with $1.5 billion in new funding for another seven years. 
 
We know that the country needs more success stories like those I have shared today, and that there is more to be done.  We need SSBCI to continue.  The President’s proposed extension would award $1 billion to states through a competitive process designed to target local market needs, including such factors as promoting inclusion, attracting private capital for start-up and scale-up businesses, and strengthening regional entrepreneurial ecosystems.  An additional $500 million would be awarded based on a state’s job losses and pace of economic recovery.
 
Small businesses are critical to our economy, and, in many ways, they are also the anchors of our communities.  Whether in rural towns, urban neighborhoods, or middle class suburbs, thriving successful small business owners and their businesses serve as important, tangible role models for young Americans.  These leaders are examples for America's youth of the many opportunities for their future and the diverse pathways that can be taken to achieving the American dream.
 
To maintain our reputation as the best country in the world to start and scale a great company, we must continue our work to ensure that vibrant startup ecosystems emerge in every corner of America and, furthermore, that all Americans are encouraged and empowered to harness their entrepreneurial talents.  SSBCI helps states invest in entrepreneurs and small businesses so they can do what they do best: take risks, develop new ideas, grow businesses, create new jobs, and set vibrant, local examples for our youth.  Indeed, these factors have had a positive impact on the national level, improving the growth of Main Street entrepreneurism and our economy. 
 
Thank you for the chance to participate this morning.  Best wishes for the rest of the conference and for the continued success of SSBCI for many years to come.
 
###


[1] http://www.treasury.gov/about/budget-performance/CJ16/18.%20SSBCI%20FY%202016%20CJ.pdf
[2]Calculated as sum of SBLF small business lending ($15.1 Bn over baseline, as reported in quarterly report) and SSBCI small business lending or investment ($6.4 Bn, based on preliminary data from the states’ 2014 annual reports to Treasury).
[3] Source: Bureau of Labor Statistics, BED
[4] Source: Bureau of Labor Statistics, BED.
[5] “New jobs” are net new jobs, calculated as jobs added less jobs lost. Source: Bureau of Labor Statistics, BED
[6] Source: Preliminary data from the states’ 2014 annual reports to Treasury. 
[7] Ibid. 
[8] Ibid. 
[9] http://www.treasury.gov/resource-center/sb-programs/Documents/SSBCI%20Summary%20of%20States%202012%20Annual%20Reports%20FINAL.pdf
[10] http://www.crainsdetroit.com/article/20140126/NEWS/301269970/bending-to-do-lending-federal-state-program-helps-small-businesses
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