Newly-Issued State Small Business Credit Initiative Guidance Rightfully Prioritizes Borrower Protections for Entrepreneurs

For immediate release: November 16, 2021

​CONTACT:

Caitlin McShane

(415) 225-8855 | caitlin@emccommunications.com

November 16, 2021 — Statement on the US Department of Treasury’s issuance of State Small Business Credit Initiative (SSBCI) program guidance from Joyce Klein, Director, Business Ownership Initiative, The Aspen Institute, on behalf of the Responsible Business Lending Coalition.

The U.S. Department of Treasury released long-awaited guidance on the State Small Business Credit Initiative (SSBCI) — a $10 billion federal program to be facilitated through states, the District of Columbia, territories, and Tribal governments to provide greater capital and resources to small business owners across the country.

Originally designed to provide recourse after the Great Recession, SSBCI was reauthorized as part of a larger COVID relief package earlier this year. To support entrepreneurs through this period of recovery, SSBCI will invest funding in venture capital, loan participation, collateral support, and other capital programs.

The Responsible Business Lending Coalition (RBLC), the nation’s leading cross-sector coalition addressing the rise of irresponsible small business lending practices, is encouraged by Treasury’s incorporation of small business borrower protections in its program guidelines—many of which draw from the coalition’s recommendations to the agency, and, more specifically, the Small Business Borrowers’ Bill of Rights. 

At minimum, SSBCI-supported transactions must include “disclosure by the lender or investor of all key terms in an easy-to-understand manner.” The RBLC recommends disclosing the annual percentage rate (APR) in addition to the loan or investment amount, payment obligation and schedule, and any fees or additional costs. Furthermore, the Department prohibits confessions of judgment--clauses that would strip away borrowers’ legal defenses—and prepayment or “double-dipping” fees in any SSBCI transaction. 

Combined, these protections will provide clarity and ease to small business borrowers when navigating financing options and safeguard them from undue costs. 

Following California and New York, the first states to pass small business truth-in-lending laws, Treasury’s guidance reflects a nationwide movement to provide small business owners with the same common-sense financing rights and protections allotted to consumers. The Responsible Business Lending Coalition welcomes this progress and will continue working with policymakers to ensure that small business owners across the country benefit from transparency in all financing products.

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ABOUT THE RESPONSIBLE BUSINESS LENDING COALITION​

The Responsible Business Lending Coalition (RBLC) is the leading cross-sector voice on small business financial protection. The coalition includes nonprofit and for-profit CDFIs, fintechs, investors, and small business advocates that share a commitment to innovation in small business lending and serious concerns about the rise of irresponsible small business lending. The coalition created the Small Business Borrowers' Bill of Rights, the first cross-sector consensus on the rights that small business owners deserve and what financing providers, brokers and lead generators can do to uphold those rights. Over 90 small business lenders, brokers and lead generators, and advocacy organizations have endorsed these standards. Members of the Responsible Business Lending Coalition include Accion Opportunity Fund, the Aspen Institute, BlueVine, Camino Financial, Community Investment Management, LendingClub, the National Community Reinvestment Coalition, Opportunity Finance Network, the National Association for Latino Community Asset Builders, and Small Business Majority. For more information, visit ​borrowersbillofrights.org.