In today’s economy, Anthony Ramon would have had a tough time securing a mortgage to buy a commercial building on Cranston’s Park Avenue, if at all.
But a federal program that is spreading $10 billion across the country – $61.7 million to Rhode Island – allowed Ramon to own a new space for his latest culinary venture, Sopha’s Café, purchased with a $120,000 loan with a 10% down payment provided in a match between Taunton, Mass.-based South Eastern Economic Development Corp. and Greenwood Credit Union.
Part of the 2010 Small Business Jobs Act reauthorized through the American Rescue Plan Act, the State Small Business Credit Initiative is meant to assist small businesses that were financially impacted by the COVID-19 pandemic.
The $61.7 million allocation is intended to fund three programs: a capital access program, a loan participation program, and an equity/venture capital program.
According to R.I. Commerce Corp. spokesperson Patrick Griffin, 80% of the first $19.7 million tranche must be deployed before requesting the second; and 80% of that must be deployed before requesting the final tranche.
Getting the loan wasn’t all smooth sailing for Ramon, given the labor-intensive verification and reporting requirements. But it was better than nothing.
“It almost amounted to what I originally planned to spend. But the way the purchase was set up made the process simpler,” he said. “There are a lot of things that they require. But we were able to get through it.”
SEED was awarded a $4.5 million interest-free loan by R.I. Commerce through the “loan participation program” and is one of several organizations chosen to distribute Rhode Island’s allocation for the State Small Business Credit Initiative.
SEED Executive Director Susan Murray says the organization has so far closed seven loans totaling $1.37 million, which has leveraged $1.73 million in bank matches.
By pooling risk, the organization can offer rates as low as 6% to local business owners, many of whom have had at least one loan denied before approaching SEED. Among the beneficiaries is Antojitos Taqueria in Woonsocket, which now owns a building on Cumberland Hill Road it had been renting, Murray says. The deal required a 10% down payment.
“The more leverage, the better,” Murray said. “We fill in the gaps to provide below-market terms for higher-risk transactions.”
In addition to SEED Corp., Lawrence, Mass.-based Mill Cities Community Investments was allocated $6 million, and the Business Development Co. of Rhode Island secured $13.38 million.
For the venture capital program, R.I. Commerce awarded $9 million to Wellesley, Mass.-based Arctaris Impact Investors; $4.5 million to New York-based Collide Capital; and $6 million to Oregon-based Rogue Venture Partners. The firms are required to allocate the money to early-stage and high-growth firms.
The largest share went to the Rhode Island-based Slater Technology Fund, which was awarded $12 million. Messages to Slater were not returned, but Director Thorne Sparkman told Providence Business News in November that the organization expected to close on at least two deals by the end of 2023, with venture funding reaching 30 or more companies over the next five years.
Griffin declined to provide a list of beneficiaries but said that the venture capital program has invested $2.1 million in 10 businesses since November. And $1.6 million in State Small Business Credit Initiative funds have been loaned to 13 businesses since July 2023.
According to the U.S. Treasury, about $1 billion has been deployed to businesses.
While states were approved at different times, an overview of the treasury’s latest quarterly report through December 2023 shows disparate success in getting money out the door.
Rhode Island, which approved its agreement in January 2023, had allocated 8% of its first tranche of funding, or roughly $1.6 million, up from the $741,000 allocated through September 2023, according to the treasury’s data.
The state has been outpaced by its neighbors. Though approved in October and June 2022, respectively, both Massachusetts and Connecticut have dispersed more than half of the first tranche.
Multiple lending partners awarded funds by R.I. Commerce did not respond to requests for comment.
In a statement, Mill Cities Community Investments spokesperson Diana Ubinas said its program is “still in the early stages” and there are “transactions in the pipeline,” but she declined to offer further details.
Paul Flynn Jr., CEO and president of Wakefield, Mass.-based BDC Capital Corp., the largest recipient of loan participation funds, declined to name the businesses in its application process but said it currently has $3.2 million worth of loans in documentation and hopes to have its first tranche of money completely allocated by summer.
BDC is offering State Small Business Credit Initiative loans ranging from $100,000 to $3 million of what in industry terms is known as “non-recourse” money, which helps financial organizations reduce their exposure while offering customers flexible underwriting and competitive pricing through partnerships with local and regional banks.
“It eliminates the risk in the transaction significantly. If the loan were to go bad, I don’t have any capital risk, so I can afford to be more aggressive,” Flynn said. “And it gives the borrower a chance to hopefully recover, grow and enable its own cash flow to catch up.
“The borrower gets a subsidized rate. And hopefully, over time, we make some money,” he said.
Flynn says the State Small Business Credit Initiative may have been slowed by the usual red tape but is still an example of public-private strategies to funnel money to Main Street enterprises.
“It always takes a while to get going. But once that happens, it rolls,” he said. “The [federal government] tried to create a one-size-fits-all. And so, states had to accommodate for that. It was the classic tale.”
Whatever the hurdles, Ramon feels blessed.
“This gave me the opportunity to grow my business,” he said. “There are many other programs where you need to come with more money on the table. So, this was perfect for a business like mine.”
