Print My Threads is a screen printing business based in Flatwoods, Ky. It had been looking to expand into a larger facility and had found it difficult to obtain financing. This small business ultimately obtained two loans from an economic development association.
With the loans, Print My Threads was able to acquire and renovate an abandoned roller skating rink and to purchase needed equipment. Now, the business has gone from three employees to 11, pays above the minimum wage and offers employees various other benefits, including a 401(k) plan.
Print My Threads received financing because of the State Small Business Credit Initiative (or SSBCI, for short). This program, which was part of the Small Business Jobs Act of 2010, allocated nearly $1.5 billion to states to support small-business financing programs between 2010 and 2016.
The initiative was born out of the Great Recession to provide capital to small businesses at a time when small-business lending and investment had fallen sharply.
The St. Louis Fed’s Community Development team recently took a look at how the SSBCI was implemented across the U.S. as a whole. We also examined how states within the Eighth Federal Reserve District deployed capital and credit to small businesses. St. Louis Fed's district covers all of Arkansas and portions of Illinois, Indiana, Kentucky, Mississippi, Missouri and Tennessee.
Flexibility in Financing
States had the flexibility to support various forms of financing. For example:
The Role of Community Development Financial Institutions
The organization that lent Print My Threads its financing—the Kentucky-based Mountain Association for Community and Economic Development—is what’s known as a community development financial institution. These are mission-driven financial institutions that specialize in lending to people, projects and small businesses that may not fit standard underwriting criteria of traditional financial institutions. They can be nonprofit organizations, credit unions, banks or venture capital organizations.
The Kentucky organization was one of several community development financial institutions to make loans through the SSBCI program. Others in the St. Louis Fed’s district that were active in the program include Priority One Bank, BankPlus, Kentucky Highlands Investment Corp. and RiverHills Bank.
Low- and Moderate-Income Areas
The SSBCI required that states develop a plan to target underserved or low- and moderate-income communities.
Our Community Development team was inspired to evaluate this program, in part, because of the availability of transaction-level data. It also allowed us to release an interactive tool that anyone can use to dive into the data, nationwide.
We wanted to provide a report and tool for officials administering the program—along with lenders and small business owners—to better tell the story and impact of the SSBCI on a local and national level.
What we found: