A few suggestions for the average, financially strapped print provider.
Accessing state capital programs
The new $1.5 billion SSBCI encourages financial institutions to lend to small businesses that might not otherwise meet conventional underwriting standards. This is accomplished by establishing a unique loan “guarantee” reserve account to recover losses from loans enrolled in the program. The loans may be used by graphics producers, content creators, and other borrowers as working capital, lines of credit, or for the purchase or construction of fixed assets such as buildings and equipment. Refinancing existing loans is also possible under the program.
An SSBCI borrower must be a “small business” with annual sales of less than $10 million and must create or retain jobs. Working capital loans can be for as much as $250,000 with a maximum $500,000 for fixed assets.
Bottom line: The federal government will kick in the funds to either a new or existing state CAP. While SSBCI funds may be used for collateral support and other innovative credit access and guarantee initiatives, the primary thrust is to CAPS.
A CAP loan has been described as a private market transaction between a lender and the borrower with all terms, fees, conditions, rates, collateral, etc., being determined by the lending bank. CAP is a portfolio insurance concept where the borrower and the state each contribute a percentage of the loan amount into a reserve fund located at the lender’s bank. This reserve fund enables the financial institution to make loans beyond its conventional risk threshold and is available to draw upon to recover losses made under the program.
The typical CAP program encourages lending by establishing a unique loan “guarantee” reserve pool. The state, the lender, and the borrower each typically pay a small fee into the pool. With every loan, each participating lending institution enrolls in the CAP program, and the reserve pool grows. The reserve pool is available to the participating lender for recovery of any losses on any loan they have registered or enrolled in the CAP.
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