Cost Report

Report to Congress submitted pursuant to Section 4106(2)

of the Small Business Jobs Act
 

2

July 2019

Cost Report

Report to Congress submitted pursuant to Section 4106(2) 

of the Small Business Jobs Act of 2010

Introduction

Small businesses are a vital part of the American economy, and their success is a critical component of 

the economic recovery. Established by the Small Business Jobs Act of 2010 (the Act), the Small Business 

Lending Fund (SBLF) is a dedicated fund that was designed to provide capital to qualified community 

banks1 and community development loan funds to encourage small business lending. The purpose of the 

SBLF was to encourage Main Street banks and small businesses to work together, help create jobs, and 

promote economic growth in communities across the nation. On September 27, 2011, the SBLF 

program’s core investment activities were completed. SBLF is now staffed primarily to monitor, manage, 

and report on these investments and related participant lending and program activities. 

This report is submitted as a requirement of Section 4106(2) of the Act, which directs the Secretary of 

the Treasury to provide a semiannual written report to Congress on all projected costs and liabilities, all 

operating expenses, including compensation for financial agents, and all transactions made for the SBLF 

program. This report reflects the estimated lifetime returns on the program’s investments and the 

outlays and obligations for the period ending March 31, 2019. 

Investments made through the SBLF program are currently expected to generate a positive return of 

$29 million, excluding administrative costs. In addition, by March 31, 2019, Treasury incurred $1.32

million in outlays for the SBLF program.

Estimated Cost of SBLF Investments

Treasury invested more than $4 billion in 332 institutions through the SBLF program. These amounts 

include investments of $3.9 billion in 281 community banks and $104 million in 51 community 

development loan funds. Collectively, these institutions operate in more than 3,000 locations across 48 

states. Initial disbursement of SBLF funding occurred on June 21, 2011, with subsequent transactions 

occurring until the program’s September 27, 2011 statutory funding deadline. 

As of March 31, 2019, 283 institutions with aggregate investments of $3.81 billion have fully redeemed 

Treasury’s investment and exited the program (compared with 277 institutions representing aggregate 

investments of $3.81 in the previous reporting period) and 4 institutions have partially redeemed $12.7

million (or 66 percent) of Treasury’s investment while continuing to participate in the program.2

 

 1 In this report, the terms “banks” and “community banks” include banks, thrifts, and bank and thrift holding companies with 

consolidated assets of less than $10 billion, as of September 31, 2010. 2 Only redemptions through fiscal year 2018 are included in the calculation of the lifetime subsidy.
 

3

As of March 31, 2019, the total increase in small business lending reported by current and former SBLF 

participants is $19.1 billion over the baseline3

. 

Treasury currently estimates that investments made through the SBLF program will generate a lifetime 

positive return of $29 million for the Treasury General Fund. The figures in the following table reflect 

Treasury’s calculation of the estimated cost of SBLF investments, as presented in the President’s Budget 

for fiscal year (FY) 2020.

Estimated Cost of SBLF Investments

(Dollars in millions)

As required by the Federal Credit Reform Act, Treasury estimated the lifetime cost and subsidy rate of 

the SBLF program on a present value basis. Assumptions used to estimate future cash flows included: (1) 

the forecasted cumulative default rate for program participants; (2) the actual and projected cash flows 

received by Treasury from the participants’ dividend, interest, and other payments; and (3) Treasury’s 

cost of raising funds to make the SBLF investments. 

Treasury estimated the budgetary cost of investments made through the program using actual program 

data for FYs 2011 - 2018. This data, combined with the expected future cash flows, results in a subsidy 

rate of -0.73 percent (compared to an original subsidy rate of 7.24 percent and a projected lifetime 

positive return (savings) of $29 million. The subsidy rate represents a projected increase in program 

costs of $1.6 million compared to the previous estimate. This difference is primarily due to the current 

model projecting a slightly different pattern of repayments than the 2019 President’s Budget model, 

which contained a projection that was lower than actual redemptions in FY2018, resulting in less 

expected lifetime dividend income and resulting in the program’s projected lifetime positive return 

decreasing to $29 million.. 

 3 As established in the Act, the baseline for measuring the change in small business lending is the average of the amounts that

were reported for each of the four calendar quarters ended June 30, 2010. The aggregate baseline lending decreases as 

participants redeem and those participants’ baseline lending is removed from the aggregate baseline. The default rate is 

estimated based on the financial condition of program participants relative to the historical performance of institutions rated 

by the major ratings agencies.

Subsidy Rate

Projected/Actual 

Investment Amount

Projected Lifetime 

Cost (Savings)

Original estimate 7.24% 17,399 1,260

President's Budget for fiscal year 2013 -2.08% 4,028 -84

President's Budget for fiscal year 2014 -1.26% 4,028 -50

President's Budget for fiscal year 2015 -0.63% 4,028 -25

President's Budget for fiscal year 2016 -0.26% 4,028 -10

President's Budget for fiscal year 2017 -1.27% 4,028 -51

President's Budget for fiscal year 2018 -1.82% 4,028 -73

President's Budget for fiscal year 2019 -0.76% 4,028 -31

President's Budget for fiscal year 2020 -0.73% 4,028 -29
 

4 

The current subsidy estimate includes a forecasted cumulative default rate (i.e., lost principal, interest, 

and dividends) of 1.46 percent compared to 1.57 percent in the previous year’s estimate. 

Outlays and Obligations for Operating Expenses 

Treasury is committed to implementing the SBLF in a cost-effective manner to protect taxpayer interests 

while achieving the program’s objectives of encouraging small business lending. The outlays for fiscal 

year 2019 primarily reflect the costs of monitoring the performance and compliance of participating 

institutions, reporting on program performance and expenses, maintaining program accounts, and 

managing the portfolio and the disposition of securities purchased. In total, as of March 31, 2019, 

outlays totaled $1.32 million. 

The figures shown in the following table reflect outlays and obligations for operating expenses incurred 

as of March 31, 2019. Descriptions of the expense categories follow the Outlays and Obligations table. 

SBLF Outlays and Obligations through March 31, 2019

Budget for 

Fiscal Year 

2019a

Outlays 

as of 

March 31, 

2019b

Obligations as 

of

March 31, 

2019c

Total 

Obligations 

and Outlays as 

of March 31, 

2019c

Salaries and benefits 653,500 335,805 0 335,805

Travel 2,000 1,117 1,117

Contracts and Other

 Legal support 0 0 0 0

 Custodian and infrastructure provider 225,000 120,498 104,502 225,000

 Asset management 459,000 216,220 242,780 459,000

 Internal controls 300,000 0 0 0

 Office of the Treasury Inspector 

General 295,000 102,755 192,245 295,000

 Other (equipment, supplies, rent) 1,500,000 544,060 937,360 1,481,420

Subtotal (contracts and other) 2,779,000 983,533 1,476,887 2,460,420

$ Total 3,434,500 1,320,455 1,476,887 2,797,342

a Represents the total budget for the Small Business Lending Fund program for fiscal year (FY) 

2019, according to the 2020 President's Budget estimate. 

b Includes outlays from Oct. 1, 2018, to March 31, 2019 tied to 2019 obligations. As of March 31, 

there were no new FY19 obligations posted for Internal Controls.

c Includes all FY 2019 obligations from Oct. 1, 2018, to March 31, 2019. This column does not 

reflect de-obligations.
 

5

 

Contract and other expenses are reported in the period obligated. Descriptions of costs related to legal 

support, financial agents, internal controls, and the Treasury’s Office of the Inspector General (OIG) 

follow:

• Legal Support: These expenses are for legal services for legal support related to the 

management of the investments. 

• Custodian and Infrastructure Provider: These expenses relate to bank custodial services for

SBLF securities and documents and payments processing for SBLF participants. 

• Asset Management: These expenses are for financial analysis and monitoring of SBLF 

participants and applicable market research regarding the community banking sector. 

• Internal Controls: These expenses relate principally to the design and implementation of 

processes and internal controls associated with the program’s asset management, operating, 

reporting, and compliance functions. This activity includes work performed by consultants to 

develop procedures, systems, information databases, and other documentation for monitoring 

and managing program activities. 

• Office of the Treasury Inspector General: These expenses reflect reimbursements to the 

Treasury’s OIG for audits of the SBLF program. The OIG is required to issue reports on the SBLF 

no less than two times each year. The FY 2019 budget for audit related activities is $295,000.