The Washington State Department of Commerce has launched the first of five planned small business loan and investment programs that are aimed at increasing access to capital for small businesses in Washington, particularly those that have been historically underserved or underbanked.
A total of $163 million in funding comes from the U.S. Treasury’s State Small Business Credit Initiative (SSBCI). Commerce manages the SSBCI programs in Washington.
The first two SSBCI programs, the Small Business Flex Fund 2 ($63 million) and the Owner-Occupied Commercial Real-Estate Loan Program ($25 million) are now accepting applications.
“Access to capital is one of the major challenges for small businesses, particularly those in historically underserved and underrepresented communities,” said Mike Fong, director of the Washington State Department of Commerce. “These innovative loan programs will help fill this funding gap and have a multiplier effect that benefits local economies across the state.”
Fong noted the short and long-term impact of the programs. Loan funds repaid will support future loans to more businesses.
Owner-Occupied Commercial Real Estate Loan Program
The $25-million Owner-Occupied Commercial Real-Estate Loan Program helps small businesses qualify for financing and lower risk related to owner-occupied real estate loans. Targeted at socially and economically disadvantaged business owners and very small businesses, the funds can be used for tenant improvements, construction, and the purchase or refinance of qualifying properties.
Where to apply: Borrowers can apply for this commercial real estate loan program through HBCDE, LLC, a subsidiary of Heritage Bank and a certified Community Development Entity, which manages the program on behalf of Commerce. Once a loan is approved, the Owner-Occupied Commercial Real Estate Loan Program will allow borrowers to qualify for a larger loan amount and, through a 9% subsidized companion loan, replace a significant portion of the cash down payment required for qualifying projects. The typical loan size is under $5 million with a 10-year term.
“We are excited to partner with the Department of Commerce to help us finance business owners who have had diminished access to credit on reasonable terms or who are expanding into underserved communities,” Bryan McDonald, president and chief operating officer of Heritage Bank, said.
Small Business Flex Fund 2 Program
Managed by Calvert Impact in partnership with Commerce, and administered by Grow America, the Small Business Flex Fund 2 program will serve the capital needs of the smallest businesses and nonprofits in Washington state. The program leverages a $63 million commitment from Commerce with dollars from private lenders. The fund will deploy its capital through community-based lenders known as Community Development Financial Institutions (CDFIs), experienced at working with under-resourced and under-banked communities that often struggle to access affordable credit. The Small Business Flex Fund 2 makes competitive, fixed-rate loans to businesses and nonprofits with 50 or fewer employees and up to $5 million in revenue.
Eligible loan uses include working capital, franchise fee payments, acquisition of equipment and inventory, services used in the production, manufacture and delivery of goods and services, and the purchase, construction, renovation or tenant improvements in eligible places of business (that are not passive real estate investments).
Where to apply: Applicants can go to the Flex Fund 2 web portal to apply for a capital loan. Eligible applicants will be matched with a participating lender who will work with the applicant to finalize interest rates and terms. Once a loan is approved, the Small Business Flex Fund 2 will purchase a portion of the loan, freeing up capital that can be used by program lenders to fund additional loans. The maximum loan amount is $250,000, and the term cannot exceed five years.
“We’re excited to once again collaborate with Commerce and Grow America to invest in the small businesses and nonprofits that form the backbone of the state’s economy,” said Joe Meginnes, director of strategy at Calvert Impact. “The Flex Fund CDFI lenders have been powerful partners to small businesses for decades and their commitment to supporting borrowers throughout the application process and the life of the loans will be essential to the program’s success.”
“At Grow America, we see the dormant strength within communities,” said Daniel Marsh, president, and CEO of Grow America, formerly NDC. “It only needs innovative thinking like this to release it. This program opens up opportunities where they didn’t exist before. By looking at the bigger picture, we are creating a continuum of support, where it’s most needed.”
Learn more and apply
Apply to the Commercial Real Estate Program: https://www.heritagebanknw.com/ssbci
Apply to Flex Fund 2: https://smallbusinessflexfund.org/
Applications for the upcoming Revenue Based-Financing Fund ($12 million) will open later this year.
More information about all of the State Small Business Credit Initiative programs can be found on the Commerce website at Small Business Loans for Washington State Companies.