Home>Articles>Gov. Newsom Announces CA Small Businesses To Receive $1.1 Billion in Federal Funding

California Governor Gavin Newsom speaking at the State of the State address in Sacramento, CA, Mar 8, 2022. (Photo: Sheila Fitzgerald/Shutterstock)

Gov. Newsom Announces CA Small Businesses To Receive $1.1 Billion in Federal Funding

‘…Who manages VC funds is critically important in the state’s push toward equity’

By Evan Symon, September 21, 2022 4:30 pm

Governor Gavin Newsom announced Wednesday that California small businesses are to receive $1.1 billion from the United States Treasury’s State Small Business Credit Initiative (SSBCI), with the hope than an additional $18 billion can be obtained soon.

According to the Governor’s office, the California Infrastructure and Economic Development Bank (IBank) and the California Pollution Control Financing Authority will split the allocation equally to fund small business credit support programs. From there, the IBank will put the SSBCI funds into the Small Business Loan Guarantee Program, with guarantees given to small businesses being applied to repay lenders up to 80% of a small businesses outstanding loan if that small business cannot make a payment. The list of lenders currently participating in the Small Business Loan Guarantee Program can be found on the IBank website here.

In addition to that program, $200 million of the SSBCI funds will go towards the new Venture Capital program that will invest in venture capital managers and owners who are either underrepresented in the VC field (such as racial minorities) and those who are socio-economically disadvantaged.

Overall, the 2022 SSBCI funding will largely follow the route of the 2010 SSBCI funding divestment, which came during the Great Recession. In 2010, only $168 million had been given by the federal Government, but that had filled over 10,000 loans in total. This has been estimated at generating more than $1 billion in income and keeping 90,000 jobs in California.

“California is home to the largest and most diverse small business community in the country,” Gov. Newsom said in a statement on Wednesday. “We’re a state that’s driven by small business innovation and entrepreneurship – that’s why we’ve invested billions of dollars to help our businesses recover from the pandemic and to give more Californians a shot at the California Dream. Thanks to this funding, underrepresented and underserved business owners will have more access to the critical funding they need to be successful and thrive.”

IBank Executive Director Scott Wu added, “IBank is not only excited to infuse our successful Small Business Loan Guarantee program with new funding, we are particularly thrilled to launch this new venture capital program. In spite of California’s dominance in the VC industry, venture capital remains inaccessible to many entrepreneurs. Increasing inclusion not only in who receives VC funding but also in who manages VC funds is critically important in the state’s push toward equity.”

$1.1 billion in federal funding

However, financial experts warned that the $1.1 billion in funding not only needs to go to small businesses, but should come with a caveat that the business should stay in California for at least five years or they will have to pay back the state the loaned money with interest.

“Right now a lot of small businesses and VC firms have been moving out of California, mostly for tax reasons, ” explained Russ Orelov, a VC manager, to the Globe on Wednesday. “But they don’t seem to have rules that the money, and ergo, the jobs and continued tax source stay in the state. As we saw through some earlier funding in the past few years, many took the money and run. Other states put in measures to keep those businesses in their own states and managed to make it work.”

“California is getting the money and is giving it to a program that can get it to small businesses. That’s fine. It worked 12 years ago. But there are no checks in place to have these companies stay for a period of time where the state can reap the benefits of helping these small businesses and VC firms out. Giving out money is one thing, but benefiting yourself in the next several years is another. If we don’t see those checks to keep them in-state, it may not be pretty. This is just another piece of short-term thinking from the state rather than playing the long game. They seem to have it down with environmental  things, but when it comes to something critical like finance, they are in the weeds.”

The SSBCI funds are expected to be available to lenders and VC firms soon.

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Evan Symon
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5 thoughts on “Gov. Newsom Announces CA Small Businesses To Receive $1.1 Billion in Federal Funding

  1. Yep November is coming, economy is failing with businesses and people leaving CA (cancer) in droves. Newscum is scared and desperate. Sadly, he and his ilk are aware people have short memories when it comes to free stuff.

  2. Keep pumping government money into the economy and watch inflation rise. Then raise interest rates to cool the inflation which happens to make life more difficult for the average citizen and then destroys their 401K retirement savings. Remember Greenspan?

  3. Gov Newsom buying votes again before an election —— gee, what a huge surprise.
    What a horrible, contemptible man Californians have been burdened with.
    Vote Brian Dahle for Governor with the confidence and assurance that you have absolutely NOTHING to lose in doing so and everything to gain.

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