Louisiana small businesses given access to financing for expansion and innovation
WASHINGTON – Louisiana is receiving $113 million from the federal government to help jump start small businesses around the state, the U.S. Treasury Department announced Tuesday.
The money comes from American Rescue Plan, which initially aimed at keeping businesses open during the pandemic shutdown. But the program is now providing money to help small businesses start and grow, particularly those in disadvantaged communities that are not in the big cities, Silicon Valley and other locales where venture capital is targeted, said Gene Sperling, a senior advisor to President Joe Biden and American Rescue Plan coordinator.
Passed on near party-line votes with Republicans opposing and Democrats supporting, the American Rescue Plan Act of 2021 provided $1.9 trillion in economic stimulus to counter business losses from the COVID 19 shutdowns.
“But that wasn’t the sole goal, it wasn’t just to get us out that deep hole in 2021,” Sperling added. “It was to ensure that there were resources and tools to have a strong, enduring, and equitable recovery.”
Gov. John Bel Edwards said access to funding is the chief hurdle for entrepreneurs – particularly those who are women or minorities or are from rural areas.
“When I talk to small businesspeople, especially those who are disadvantaged, access to capital is the number one inhibitor to success,” Edwards said at a press conference. “We’re going to invest in new ideas, we’re going to invest in innovation. And quite frankly, things may never come to life in these businesses without this type of program.”
Jacob Leibenluft, U.S. Treasury chief recovery officer, added: “We know that the same small businesses that have too often have been traditionally shut out of the financial systems, including minority small businesses, were hit the hardest by the economic impact of COVID 19.”
The American Rescue Plan’s State Small Business Credit Initiative, SSBCI, is a $10 billion infusion into a 12-year-old federal program. SSBCI was first established in 2010 as a way for the federal government to help states support small businesses that were creditworthy but unable to access capital.
State governments submitted detailed plans for how they would use the American Rescue Plan money to help provide funding for small businesses, including through venture capital programs, loan participation programs, loan guarantee programs, collateral support programs and capital access programs.
Most of Louisiana $113 million allocation – up to $91.5 million of the money– is allocated to venture capital and seed money programs. Louisiana Economic Development Corporation is working with participating equity funds and financial institutions to disburse SSBCI funds via Louisiana’s five small business support programs.
Edwards stressed that the state and federal governments are not giving money directly to businesspeople and wishing them well. Rather, the money will flow through five state programs that will provide funds to private financiers to bolster individual applications for specific projects.
Thirteen equity groups have gone through an approval process and banks are in the process of deciding whether to accept applications from entrepreneurs pitching businesses. The government money is reducing the financial risk of private financiers who will loan the money to the small business applicants.