S. 3876 — SPARK Act

This section states congressional findings on (1) the effectiveness of incubators and accelerators in increasing revenues, employees, and success rates for participants; (2) minority-owned startups being more than twice as likely to be denied financing, with mission-oriented lenders being critical; (3) minority- and women-owned businesses being half as likely to have workers, potentially adding 9.5 million jobs if starting at non-minority/male rates; (4) less than 1% of venture capital going to rural businesses, with entrepreneurship rates falling from 20% in the 1980s to over 12% in the 2010s and heightened barriers for rural minorities; (5) only 2% of venture capital going to women-founded businesses; and (6) less than 3% going to Black- and Hispanic-founded businesses.

This section sets forth the purposes of the Spark Program (established under section 49 of the Small Business Act), which are to (1) spur economic growth in underserved communities by creating good-paying jobs and increasing access to capital; (2) increase prospects for success for small business concerns in underserved communities, which often have higher business failure rates than the national average; (3) create a pipeline for individuals in underserved and rural markets into small business ownership; (4) close gaps in revenue and number of employees for underserved small business concerns; (5) encourage collaboration between the Small Business Administration and organizations serving low-income, minority, and rural communities; and (6) grow existing incubators and accelerators focused on empowering underserved communities and entrepreneurs.

This section establishes the Spark Program in the Small Business Act, requiring the SBA Administrator to develop and implement it within one year of enactment of the Strengthening Place-based Access, Resources, and Knowledge Act by entering into cooperative agreements with eligible entities (i.e., operators of accelerators, incubators, or other small business innovation projects, including 501(c)(3) organizations, community development financial institutions, minority depository institutions, 7(m) lenders, certified development companies, Community Advantage lenders, and certain higher education institutions) to provide financial assistance for 5-year projects benefiting startup, newly established, or growing small business concerns (including cooperatives and community land trusts). The section authorizes renewal of such agreements for additional 3-year periods and requires projects to maximize accessibility to intended beneficiaries, maintain full-time staff including a director with expenditure and management authority, and include jointly developed programs and services with SBA.

This section establishes the Spark Financing Program, requiring the SBA Administrator to provide financial assistance within one year of enactment to covered entities (i.e., eligible entities under section 49 or certain lenders), which must use the assistance to make grants of up to $20,000 or loans with below-market interest rates or equity requirements to covered small business concerns (i.e., those owned by underserved groups under section 49(c)(2)(E) or located in federally recognized areas of economic distress). Financial assistance totals up to $1 million per year for covered entities with a section 49 cooperative agreement (received concurrently without reapplication) or up to $500,000 per year for others (requiring annual reapplication), with grants directed at economic development objectives such as job creation or retention, local economic improvement, or public policy goals including business district revitalization, export expansion, minority- or women-owned business development, rural development, and veteran-owned business expansion (i.e., objectives from the development company program at 15 U.S.C. 695(d)). (Thus, the program supports startups, newly established, or growing small businesses facing financing barriers by bridging public and private funding.)

This section directs the Small Business Administration Administrator to promulgate, not later than one year after enactment, regulations to implement sections 49 and 50 of the Small Business Act, as amended by this Act. The regulations must include procedures (1) to verify the proper use of financial assistance provided under those sections, including any grant or loan made under section 50 using such assistance; and (2) to establish clawback provisions for fraud involving any such financial assistance, grant, or loan.