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State-backed collateral and loan participation for Kentucky businesses through participating lenders and Keyhorse Capital venture funding.
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Sign in to save this grantKentucky’s $117M KSBCI 2.0 helps businesses secure loans they could not get alone by pledging state collateral so private lenders say yes.[1] Standard backing is 20% of a loan. For businesses owned by Socially and Economically Disadvantaged Individuals (SEDI), Very Small Businesses with fewer than 10 employees, or those in disaster-declared areas, that backing jumps to 50%.[3] The program splits into two paths: a lender-mediated loan track and a venture capital track run by Keyhorse Capital on quarterly windows.
I will walk you through which one matches your situation, where the paperwork gets heavy, and what to say when you pick up the phone.
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The program works in two structurally different lanes. Mixing them up wastes weeks. A borrower who approaches a lender expecting VC-style equity, or a startup founder who expects a collateral-backed loan, ends up in the wrong room. Here is a side-by-side breakdown:
Two programs live inside the loan track, and the distinction between them changes whether your application even qualifies. KYCSP provides a pledged cash collateral account to a participating lender, covering up to 20% of the loan value as additional collateral security.[2] The catch: KYCSP is fixed assets only. Real estate and equipment qualify. Inventory, payroll, operating cash, and lines of credit do not. A lot of applicants only discover this after their first lender conversation.
KYLPP works differently. Instead of pledging collateral, KEDFA actually purchases a portion of the loan, up to 20% of its value, which reduces the lender’s direct exposure. KYLPP can apply to a broader range of loan types than KYCSP, though the lender still controls what they will originate.
For commercial real estate under KYCSP, the business must occupy at least 51% of the financed space. A building bought primarily to rent to others does not qualify. Any tenants sharing space must be commercial, not residential.
KYCSP covers real estate and equipment purchases. Working capital, inventory financing, and lines of credit do not qualify under that track. If you need operating cash, ask your lender specifically about KYLPP.
KYCSP fixed-asset check
Both KYCSP and KYLPP can reach 50% state participation for three categories: SEDI-owned businesses, Very Small Businesses, and those operating in disaster-declared areas.[3] That jump from 20% to 50% is not a minor adjustment. On a $400,000 loan, the state’s collateral pledge goes from $80,000 to $200,000. A lender who was uncomfortable approving the deal at 20% backing may see it very differently at 50%.
SEDI status covers 11 federal categories, including race, gender, veteran status, disability, and residency in certain rural areas. VSB status applies to businesses with fewer than 10 employees. There is also a separate pool of reserved capital: federal reporting confirms dedicated SEDI and VSB set-asides within Kentucky’s allocation. If the majority owner fits any of those categories, that should be the first thing they say when contacting a lender.
Lead with your SEDI or VSB status when you call a lender. Say directly that your business may qualify for 50% state participation rather than the standard 20%. It reframes the risk conversation before underwriting begins.
Expert Tip
Loan applicants never file directly with the state. An enrolled participating lender handles the enrollment and submission process alongside their own underwriting. As of December 2024, KEDFA board minutes confirmed 56 participating lenders across Kentucky, up from 54 in February of that year.[5] Every county has at least three options. The live directory at ced.ky.gov keeps the list current.
Deals where the state’s participation stays under $250,000 are decided entirely by the lender. Above that threshold, the Cabinet for Economic Development reviews the credit decision alongside the lender.[6] Larger borrowers should build extra runway into their timeline.
Do’s
Don’ts
The VC track is separate from the lender-mediated path in every practical sense. Keyhorse Capital manages Kentucky’s SSBCI venture funds and accepts applications through quarterly investment windows: January through March, April through June, July through September, and October through December.[7] The current window closes on June 30, 2026. Applications go through Keyhorse’s portal at keyhorse.vc/apply.
Keyhorse specifically targets innovative, technology-enabled companies at the prototype, product-market fit, or early-growth stage. A strong founding team and an existing private investor commitment are baseline expectations, not nice-to-haves. If your business does not have private investors already engaged, the VC track is likely premature.
Two funds operate under the Keyhorse umbrella. The Kentucky Matching Ventures Fund makes direct investments in companies alongside private capital. The Kentucky Strategic Ventures Fund operates as a fund-of-funds, backing Kentucky-focused venture firms rather than individual companies. Both run on the same quarterly calendar.
The VC track is not a substitute for the loan track and is not aimed at general small businesses. It targets scalable startups that can attract private investors. If that does not describe your business, the loan track is where you should focus.
The state does not publish a universal borrower checklist because requirements vary by lender and deal. That said, most loan-track applicants should expect to prepare recent quarterly and annual financial statements, proof of business ownership, a description of the asset being financed, and whatever the lender’s standard underwriting package requires. VC applicants submit diligence materials through Keyhorse’s portal.
Closing fees on the state’s portion of loan support are structured at 1%, 2%, or 3% depending on the term of state support. KEDFA approved a waiver of those fees through a date confirmed in December 2024 minutes.[4] If you are applying in 2026, verify whether the waiver was extended before factoring it into your cost calculations. Even at full fee, the cost of 2% on the state’s participation is typically far less than the collateral shortfall that blocked the loan.
Confirm participating lender enrolls KSBCI loans Identify whether your loan purpose qualifies as fixed assets under KYCSP Determine SEDI or VSB status before first lender call Gather recent quarterly and annual financial statements Verify current closing-fee waiver status with your lender Check the live lender directory for county coverage
Required Steps
No. It is a credit enhancement program. The state pledges collateral or purchases a portion of a private loan to help businesses qualify for financing they could not otherwise access. No direct cash awards are made to applicants.
No. KYCSP is fixed assets only, covering commercial real estate and equipment. Working capital, lines of credit, and inventory financing are not eligible under KYCSP. KYLPP may apply to a broader range of loan purposes; ask your lender.
Yes. Both KYCSP and KYLPP can reach up to 50% state participation for SEDI-owned businesses, Very Small Businesses with fewer than 10 employees, and disaster-area businesses, compared to the standard 20%. Dedicated capital pools are reserved for those categories within Kentucky’s allocation.
Keyhorse runs quarterly investment windows: January through March, April through June, July through September, and October through December. The current window deadline appears at the top of this page. Applications are submitted at keyhorse.vc/apply.
The Cabinet’s lender documents page lists cedsbsd@ky.gov and the 800-626-2930 assistance line for lender inquiries. Your first practical step is still to find a participating lender in your county from the live directory, then contact them directly to begin the conversation.
If KSBCI 2.0 does not fit because you need a direct grant rather than credit support, Invest 606: Accelerate Strategic Growth Grant is a standalone Kentucky opportunity worth reviewing.
The two most expensive mistakes on KSBCI are choosing the wrong track and missing the SEDI or VSB uplift. One sends you to a lender with the wrong loan purpose; the other leaves 30 additional percentage points of state backing on the table before the conversation even starts.
Grantaura’s application review works through both problems before you face a banker or a Keyhorse review panel. We check which track fits your business model, flag whether your loan purpose clears the KYCSP fixed-asset requirement, and confirm whether your ownership structure qualifies for the 50% uplift. We do not replace the lender; we make sure you walk into that first call with a clear position instead of an improvised one.
If you are still deciding between the loan track and VC track, a 1-on-1 consultation with a grant expert will clarify the fit and tell you what to bring to your first meeting.
Your Grant Assessment fee is non-refundable, but the base assessment fee can be deducted once toward the same grant’s Full Application when you choose the optional checkbox at checkout.
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For this page I reviewed the official KSBCI program materials, the Governor’s SSBCI press release, Keyhorse Capital’s quarterly cycle announcements, KEDFA board minutes through December 2024, and regional reporting from SOAR Kentucky. The 50% uplift figures, the fixed-asset restriction on KYCSP, the 56-lender count, and the fee-waiver timing all came directly from those sources. If something looks out of date or you have newer documentation, reach out. The lender count and fee-waiver status are the two details most likely to shift.
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