Executive Summary

Program Evaluation of the U.S. Department of Treasury State Small Business Credit Initiative

Center for Regional Economic Competitiveness & Cromwell Schmisseur

OCTOBER 2016

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Executive Summary

Executive Summary

Small businesses are a vital part of the American economy 

and their success is a critical component of economic growth. 

Established by the Small Business Jobs Act of 2010, the State 

Small Business Credit Initiative (SSBCI) provided nearly $1.5 

billion to state small business financing programs. A departure 

from federal credit programs with uniform requirements, 

SSBCI gave states significant flexibility to design programs 

that met local market conditions. For some states, this meant 

targeting micro-businesses; for others, it meant targeting 

manufacturers or high-tech businesses. Each state has its own 

needs and, with them, a unique set of partners to administer 

the programs.

With this flexibility, states, territories, and municipalities1 directed SSBCI funds to 152 small 

business programs with a wide range of models and strategies. Approximately 69 percent of 

the funding supported lending or credit support programs and 31 percent supported venture 

capital programs. This report studies program activity based on data reported to Treasury on 

16,919 transactions made between 2011 and 2015, and interviews of state program managers 

and their partners. 

Key Program Statistics

• State SSBCI programs supported nearly $8.4 billion in new capital in small business 

loans and investments by the end of 2015. States expended $1.04 billion (72 percent of 

available SSBCI funds) to leverage nearly $8.4 billion of new lending and investing. 

• SSBCI provided capital to very small and young businesses. Eighty percent of SSBCI 

transactions supported businesses with 10 or fewer full-time employees and nearly half 

the supported businesses were less than five years old. 

• States designed and marketed SSBCI programs that addressed capital needs in 

low- and moderate-income (LMI) areas. Through 2015, 42 percent of the 16,919 SSBCI 

transactions were with small businesses located in LMI census tracts. In several states, 

a successful relationship with community development financial institutions (CDFIs) 

resulted in higher percentages of loans in LMI areas.

1 Treasury approved applications from 47 states, the District of Columbia, five territories, and municipalities in three states 

(collectively referred to as “states”).
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Program Evaluation of the U.S. Department of Treasury State Small Business Credit Initiative

General Themes 

From 2012-2015, the consultants interviewed managers of SSBCI state programs. Several 

overarching themes emerged from these interviews.

• The SSBCI program model leveraged state expertise and networks. States are well 

positioned to collaborate with the federal government on small business programs 

because they understand local market needs, can build an integrated support system, and 

can manage these programs either directly or with local partners. 

• States expanded existing or built new programs that addressed local objectives. 

State programs addressed the spectrum of small business financing needs, from loans for 

microbusinesses and equipment purchases for small manufacturers to equity capital for 

early stage technology businesses. 

• SSBCI helped build capacity at the state level. Treasury played an active role as technical 

assistance provider to facilitate knowledge sharing among state program managers. By 

participating in a national network of practitioners interested in documenting and sharing 

detailed information on small business financing programs states replicated best practices 

and expanded their capabilities.

• SSBCI state programs complemented existing federal small business programs. State 

programs complemented federal programs, such as Small Business Administration (SBA) 

or U.S. Department of Agriculture (USDA) loan guarantees, which typically have uniform 

national requirements. Furthermore, SSBCI’s state programs filled market gaps that some 

other federal programs do not cover, such as guaranteeing loans from CDFIs, financing 

non-profits, directly targeting collateral shortfalls related to falling property values, and 

supporting equity financing for high-growth potential businesses. 

• Successful state programs shared common characteristics. State programs that 

successfully deployed SSBCI funding in support of small business financing:

• addressed a clearly defined capital gap;

• were staffed by teams with relevant experience and strong working relationships 

with private lenders and investors;

• aligned with state economic development objectives and had the support of their 

state agency and state leadership; and,

• aligned with market expectations in terms of pricing and business practices.
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Executive Summary

Observations from Credit Support Programs

States directed approximately $1 billion, or 69 percent of total SSBCI funds, to credit support 

programs that supported small business lending, such as capital access, loan guarantee, loan 

participation, and collateral support programs. Through different mechanisms, each program 

type shares a portion of the risk of loan repayment with lenders, thereby enabling transactions 

that might not otherwise have occurred. From 2011 to 2015, states operated 103 active credit 

support programs supporting nearly 15,600 transactions. Credit support programs expended 

$766 million in SSBCI funds to spur $5.3 billion in new loans and investments. 

• Capital access programs (CAPs) supported a high volume of very small loans: The 

median CAP loan size was approximately $14,800 and almost 47 percent of CAP loans 

supported businesses in LMI areas. CDFIs actively adopted CAPs in states with pre-existing 

programs. CDFIs accounted for 65 percent of the 10,561 CAP transactions. Large banks 

did not adopt CAP as many states had expected in 2011, leading states to reapportion 85 

percent of their original CAP allocations to other programs. 

• Other credit support programs varied widely in design, but tended to support larger 

loans: Loan guarantee, loan participation, and collateral support programs supported 

larger transactions, with a median size of $300,000. On average, states used SSBCI 

funds to support 17.4 percent of each transaction, implying a leverage ratio of 5.75:1. By 

redeploying funds after repayment (recycling), other credit support programs achieved a 

leverage ratio of 6.44:1 by year end 2015. Manufacturers were the most common business 

type, representing 17 percent of all non-CAP credit support transactions. 

• Community banks and CDFIs were the most active lenders: Community banks and CDFIs 

were the most active lenders in the credit support programs. Together they represented 81 

percent of the total number of loans supported by SSBCI and were critical in helping SSBCI 

provide capital to underserved areas. Community banks alone accounted for 61 percent of 

the dollar volume supported by SSBCI credit support programs. Few large national banks 

participated, representing 6 percent of total loans, but several that did were among the 

top volume lenders.

• Lessons learned from implementation: 

• The most widely used programs incorporated input from lenders in the program 

design process; aligned their terms, conditions, and documentation with market 

practice; and engaged in a consistent marketing effort. 

• Programs that subordinated the state’s position on collateral to the lender achieved 

faster market acceptance. 

• CAPs levered private dollars 23.12:1 and all other credit support programs combined 

achieved 5.69:1 leverage on initial deployment (before recycling). 

• Reaching underserved communities requires focused marketing through a network 

of lenders connected to targeted communities.
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Program Evaluation of the U.S. Department of Treasury State Small Business Credit Initiative

Observations from Venture Capital Programs

Thirty-eight states directed approximately $450 million, or 31 percent of total SSBCI funds, to 

venture capital programs. Market conditions for equity financing vary widely across the country 

so states customized their SSBCI venture capital programs to work locally. 

This report categorizes venture capital programs into four different groups based on the type 

of entity primarily responsible for operating the program: funds, state-supported entities, 

state agencies, and co-investment models. Between 2011 and 2015, venture capital programs 

supported over 1,300 equity investments with $278 million in SSBCI funding, generating $3.1 

billion in new investment. 

• States partnered with specialized third-parties to administer venture capital 

programs: In most cases, states partnered with private investment funds (funds) or 

specialized non-profits (state-supported entities) with expertise to source, structure, 

close, and manage equity investments in small businesses. Funds and state-supported 

entities managed 83 percent of the SSBCI funding allocated to venture capital programs. 

• States tended to target early-stage businesses: Venture capital programs targeted 

high-growth potential businesses in various stages of development: pre-seed and proofof-concept; seed-stage and early-stage; growth stage and later stage; and mezzanine and 

debt investments. About two-thirds of the transactions supported pre-seed and seed 

capital investments where states saw the greatest immediate need.

• States with less access to venture capital tended to use SSBCI for equity programs: 

States outside the historically dominant venture capital hubs were more likely to allocate 

SSBCI funds to venture programs. 

• Measures of success varied with program strategy: States prioritized financial return 

and economic development outcomes differently depending on their program objectives. 

The primary measure of success was leverage – the amount of new investment supported 

by or induced by SSBCI. States also monitored financial return on investment, investee 

contributions to the state tax base, and quality of jobs created, among other outcomes. 

However, because venture investments mature over a long timeframe (typically six to 15 

years), the full extent of outcomes from these investments will not occur or be measured 

until after SSBCI sunsets in 2017. 

• Lessons learned from implementation:

• Selecting partners and establishing new funds may take up to a year.

• A base of local investors, specifically local investment funds, is critical to supporting 

high growth potential businesses. 

• Key operational and compliance considerations include conflicts of interest and the 

ability to track federal funds through to each transaction.
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Executive Summary

About the Report

This report presents an analysis of SSBCI program activity from 2011 to 2015. Chapters 1 and 

2 provide program background and examine overall outcomes in relation to federal program 

objectives. Chapters 3 and 4 summarize credit support and venture capital program activity 

separately. The report concludes with a synopsis of key findings and conclusions derived by the 

authors from their own experience as well as input provided by state SSBCI program managers. 

A team of consultants under the management of Ken Poole from the Center for Regional 

Economic Competitiveness and Eric Cromwell and Dan Schmisseur of Cromwell Schmisseur 

authored this report. 

The report draws on quantitative data reported to Treasury by the states combined with more 

than 200 telephone interviews with state program managers, several expert practitioner 

working group reports, more than 50 lender and investor interviews, and more than 20 site 

visits conducted between 2012 and 2015. From this data and the cumulative insights gleaned 

from SSBCI staff and consultants retained to provide technical assistance to states, this report 

offers an assessment of program results and lessons for public-supported financing programs 

that impacted every state and territory.
PROGRAM EVALUATION OF THE US DEPARTMENT OF TREASURY 

STATE SMALL BUSINESS CREDIT INITIATIVE 

OCTOBER 2016

PREPARED BY

CENTER FOR REGIONAL ECONOMIC COMPETITIVENESS

CROMWELL SCHMISSEUR