MOBUCK$ provides state funding for low interest small business loans managed by private banks.
Small business loan programs are generally used at higher rates when federal interest rates increase, and private capital is less available.
Low income and minority-owned businesses benefit the most from small business loan programs, especially in unstable markets.
was established in 1985 to help MO companies secure capital at a low-interest rate to help grow businesses (MO State Treasurer, 2024). These loans are managed by qualified lending institutions, such as banks and credit unions, and offer interest rates 2-3% lower than the market average. Entities that are eligible for the MOBUCK$ program include (with the number of loans and approximate dollar amount issued in FY23 included):
MOBUCK$ aims to help groups that would otherwise have difficulty securing capital, especially at higher interest rates. In 2023, MOBUCK$ allocated more than $538M through more than 1,000 loans, including nearly $342M in new loans (MO State Treasurer, 2023). . In MO, women make up 51% of the population, non-white residents make up 22%, and veterans make up about 6% (U.S. Census, 2023). Some regions have higher investment, for example, Jackson and the combined St. Louis City and County invest a respective 29% and 21% of their MOBUCK$ dollars in women- or minority-owned (MO State Treasurer, 2023). Jackson County is 51.4% female, and 39% non-white, while St. Louis City is 51% female and 54% non-white, and St. Louis County is 52% female and 36% non-white (US Census, 2023).
Over the past 10 years, MOBUCK$ has utilized an average of 43% ($346M) of its allotted $800M budget per year (MO State Treasurer, 2023; Figure 1). In 2023 the program achieved its highest use rate (67%), while its second highest was in 2019 (65%). The State Treasurer’s Office suggests that higher federal interest rates drive MOBUCK$ use. In 2019, annual rates averaged 2.16%, and in 2023 rates averaged 5.03% (STL Fed, 2024). However, high use years can have low interest rates, as in 2020 (55% and 0.36%, respectively), and vice versa, as in 2017 (26% and 1%).
While there is no research specifically on the MOBUCK$ program, the Small Business Administration’s (SBA) 7(a) loan program similarly seeks to “alleviate the financial constraints experienced by small businesses, particularly those in underserved communities, and to foster economic development,” (Jeong, 2023). SBA’s 7(a) program offers federally backed loans through financial institutions and offers lower interest rates (Craig et al., 2009). As with MOBUCK$, these programs have somewhat higher use when federal interest rates are higher and lenders are more reluctant (Hackney, 2022).
Research is split about the impact on disadvantaged borrowers and communities. For adults who lack college credentials and substantial personal net worth, there is no evidence that capital constraints are a barrier to starting a small business (Bates, 2011). Similarly, when controlling for other variables, SBA loans have no significant impact on regional growth (Suk Lee, 2018). However, SBA loans have been shown to increase loan size, employment, and property acquisition for small businesses, and to decrease defaults during periods of financial instability (Hackney, 2022). Additionally, SBA loans have a positive effect on employment in low income and minority communities (Jeong, 2023), who are more likely to face barriers when accessing capital for small business ventures (Bates and Robb, 2014; Bates, et al., 2018).
Figure 1. MOBUCK$ Utilization, Interest Rates, and Lending Cap. The amount of money loaned by MOBUCK$ each year (annual total), the 10-year average use of the program (blue line), the current cap on the MOBUCK$ program lending (green line), and the yearly average federal interest rate (orange line, STL Fed Reserve, 2024), over the last decade.
References
Craig, B.R., W.E. Jackson, and J.B. Thompson. (2009). The economic impact of the Small Business Administration’s intervention in the small firm credit market: A review of the research literature. Journal of Small Business Management. 47(2): 221-231. https://doi.org/10.1111/j.1540-627x.2009.00269.x
Bates, T., Magnus Lofstrom, and Lisa J. Servon. (2011). Why Have Lending Programs Targeting Disadvantaged Small Business Borrowers Achieved So Little Success in the United States? Economic Development Quarterly. 25(3) https://doi.org/10.1177/0891242411409206
Bates, T., and A. Robb. (2014). Small-business viability in America’s urban minority communities. Urban Studies. 51(13): 2844-2862. https://doi.org/10.1177/0042098013514462
Bates, T., William D. Bradford, William E. Jackson III. (2018). Are minority-owned businesses underserved by financial markets? Evidence from the private-equity industry. Small Business Economics. 50: 445-461. https://link.springer.com/article/10.1007/s11187-017-9879-1
Hackney, J. (2022). Small Business lending in Financial Crises: The Role of Government-Guaranteed Loans. Review of Finance. 27(1): 247-287. https://doi.org/10.1093/rof/rfac002
Jeong, J. (2023). Do Government Guaranteed Small Business Loans Increase Employment? Evidence from US Counties, 2010-2016. Journal of Policy Studies. 38(2): 11-21. https://doi.org/10.52372/jps38202
MO State Treasurer (2024). MOBUCK$: Linked Deposits for small businesses, farms, and communities. https://treasurer.mo.gov/content/low-interest-loans/
MO State Treasurer (2023). 2023 Linked Deposits Committee Annual Reports. https://treasurer.mo.gov/CommitteeAnnualReports/MLDP_Annual_Report_2023.pdf
STL Federal Reserve (2024). Federal Funds Effective Rate. https://fred.stlouisfed.org/series/FEDFUNDS
Suk Lee, Y. (2018). Government Guaranteed Small Business Loans and Regional Growth. Journal of Business Venturing. 33(1): 70-83. https://doi.org/10.1016/j.jbusvent.2017.11.001
U.S. Census (2023). QuickFacts: Missouri. https://www.census.gov/quickfacts/fact/table/MO/VET605222#VET605222
U.S. Census (2023). QuickFacts: Missouri, Jackson County, St. Louis City (County), St. Louis County. https://www.census.gov/quickfacts/fact/table/stlouiscountymissouri,stlouiscitycountymissouri,jacksoncountymissouri,MO/VET605222
