Q: What types of businesses are not eligible?
A: A business cannot
◦ Be engaged in activities that are prohibited by federal law, speculative activities that profit from fluctuations in price, or pyramid sales.
◦ Earn more than half of annual its net revenue from lending activities.
◦ Derive more than one-third of its gross annual revenue from gambling activities.
◦ Use loan funds for acquiring or holding passive investments in real estate, the purchase of securities, or lobbying activities.
◦ Be convicted of an offense against a minor or debarred from doing business with the federal, state, or local governments.
Q: I keep hearing the acronym SSBCI — what does that mean?
A: SSBCI stands for State Small Business Credit Initiative. The American Rescue Plan Act of 2021 reauthorized and expanded the State Small Business Credit Initiative Program, which was originally established in 2010.
The program provides a combined $10 billion to states to expand access to capital for small businesses emerging from the pandemic. The goal of the program is to boost opportunity, entrepreneurship and create high-quality jobs. The U.S. Department of Treasury announced Tennessee’s funding on Feb. 27. Those funds go from the federal government to the Tennessee Department of Economic and Community Development (TNECD). LendTN Participant Lenders and LaunchTN deploy the funds.
Q: What does SEDI mean?
A: SEDI is a government acronym that stands for socially and economically disadvantaged individuals. Fifty-two percent of Fund Tennessee’s $117 million in federal funding must go to SEDI businesses.
SEDI businesses are owned or controlled by individuals who have had limited access to credit on reasonable terms including members of a group subjected to racial or ethnic prejudice in American society, gender, veteran status, limited English proficiency, disability, long-term residence in a location isolated from mainstream American society, long-term residence in a rural community, residence in a community undergoing economic transitions (including communities impacted by shift to net-zero) or membership in an underserved community. Businesses also have SEDI classification they are located in Community Development Financial Institution (CDFI) Investment Area or will locate in one.
Q: What do these terms mean? “Pre-Seed, Seed, Series A, Series B”
A: As a business becomes more mature, it advances through funding “rounds,” raising different amounts of money as it grows.
Pre-seed is the earliest stage of investment, and generally includes self-funding, plus capital from family and friends. Seed funding is usually the first equity funding stage and it funds first steps, which could include market research or product development. When a company demonstrates product-market fit, it generally raises a Series A round. To take the company to the next level, it moves to Series a B round.
Q: What is the difference between equity and debt?
A: Debt involves borrowing money. Generally, in the instance of Fund Tennessee, debt would mean getting a loan from one of the partner CDFIs.
Equity is when a company sells a stake in its company in return for capital investment. For InvestTN, an equity investment would take varying forms depending on what “bucket” it’s a part of — the Regional Seed Fund, Technology Fund or Multi-Fund.
Q: Are you doing anything to support founders who take InvestTN capital?
A: LaunchTN is building out a statewide expert network who will be able to answer the obscure questions entrepreneurs have. The organization is also building a perks database for founders, which will include deals and discounts on items, such as Google Cloud or Hubspot software, needed to thrive in business.
Q: What does a 1-to-1 match mean?
A: SSBCI is designed to use private dollars to magnify its results. Every $1 of capital from Fund Tennessee, must be matched at least with $1 of private capital.
Q: Is Fund Tennessee a grant program?
A: No. Businesses may receive a loan (LendTN), an investment (InvestTN), or technical business assistance (AssistTN).
Q: What is a VSB?
A: Very Small Business. It is a business that has less than 10 employees. A portion of SSBCI dollars are for VSBs.
Q: How long will the Fund Tennessee program last?
A: Fund Tennessee is intended to run for 8 to 10 years.
Q: If I want to learn more about the program, where should I look?
For additional information on the federal program, visit the U.S. Department of the Treasury website.
Q: What is the current investing landscape in Tennessee?
A: Access to capital is one of the state’s greatest challenges. Access to capital is also a critical component to running or growing a thriving business.
