Since sketching out the concept and principles, Associate Professor Adair Morse and Professor Laura Tyson have worked with the City of Berkeley in their SOS Loan Program, the City of Oakland, and the State, as partners in the California Small Business Task Force. This group is now in conversation with the California state government and other partners about a possible statewide expansion of the SOS Loan Fund into the California Small Business Rebuild Fund.
The public investment would be structured as subordinated or “first-loss” capital, so when payments from the small business borrowers flow back into the loan fund, private investors with a senior claim on repayment would be repaid before the public institutions. This structure reduces the risk and increases incentives for private capital to participate.
Adair Morse, faculty co-chair of Berkeley’s Sustainable and Impact Finance Initiative, is a key architect of the program:
“We devoted our time and energy to this project for one goal — to help state and local governments support the people and our communities. To accomplish this, our design ensures that any capital that governments and philanthropists invest in small business loan programs reaches as many viable small businesses as possible, with much attention both to the details of the loans and underwriting and to accessibility of loans to small businesses owned by people of color and women.”