SSBCI PROGRAM PROFILE:

CAPITAL ACCESS PROGRAM 

May 17, 2011 

State Small Business Credit Initiative (SSBCI) 

U.S. Department of the Treasury 
US Department of Treasury

State Small Business Credit Initiative Program Profile 

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5/2011

CAPITAL ACCESS PROGRAM 

State Small Business Credit Initiative

What is a Capital Access Program (CAP)?

A CAP is a loan portfolio insurance program that enables small businesses to obtain credit to help them 

grow and expand their businesses. In this program, when a participating lender originates a loan, the 

lender and borrower combine to contribute a percentage of the loan or line of credit, from 2% to 7%, 

into a reserve fund, held by the lender. The state matches the combined lender/borrower contribution, 

and sends the state contribution to the lender-held reserve fund. Each lender’s total CAP reserve fund is 

available as cash collateral to cover losses on all loans in the lender’s CAP portfolio. Participating loans 

are originated and serviced by the lender, and the lender may make claims to withdraw from the 

reserve for losses incurred in the case of a default. 

What are the Credit and Loan Characteristics? 

Like all credit programs, a CAP can be tailored to meet a state’s objectives. Key credit and loan 

characteristics that should be considered in designing a CAP are described in the table below.

Characteristics Description

What kinds of borrowers 

are eligible to 

participate? 

• Typically, states set broad eligibility criteria for CAPs. Some states 

target specific industries, regions, and types of businesses by offering 

extra contributions to lenders’ reserve funds. 

• Under SSBCI, maximum borrower size should not exceed 500 

employees. In practice, small businesses are typically much smaller 

than 500 employees. 

• Corporations, partnerships, and sole proprietorships are eligible, 

including non-profits and cooperatives. 

• SSBCI Policy Guidelines provide specific guidance on certain borrowers 

who are prohibited from participating in this program. 

What sizes of loans are 

eligible? 

• Under SSBCI, the loan size must not exceed $5 million. In practice, the 

average loan size ranges up to $100,000. 

• Typically, loan sizes are relatively consistent to avoid one large loan 

loss depleting the reserve. 

What types of loans are 

eligible? 

• Broad eligibility on loan types, but usually term loans and lines of 

credit. 

• The CAP reserve fund is well-suited to smaller loans of similar risk 

characteristics, working capital loans, and revolving lines of credit. 

How can loan proceeds 

be used? 

• For any business purpose, including, but not limited to: start-up costs, 

working capital, business procurement, franchise fees, equipment, 

inventory, and the purchase, construction, renovation, or tenant 

improvements of an eligible place of business that is not for passive 

real estate investment purposes. 

• CAPs may not enroll the unguaranteed portions of Small Business 

Administration (SBA) guaranteed or other federally guaranteed loans 

without the express, prior written consent of the United States (U.S.) 

Treasury. 

• Restrictions apply to refinancing and other uses; please refer to the 

SSBCI Policy Guidelines for additional details. 
US Department of Treasury

State Small Business Credit Initiative Program Profile 

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CAPITAL ACCESS PROGRAM 

State Small Business Credit Initiative

Characteristics Description

Who negotiates the 

terms of the loan? 

• Interest rates, maturity, collateral, and other terms are negotiated 

between the borrower and the lender. 

• Under SSBCI, the combined borrower and lender contribution to the 

reserve fund must range from 2% to 7%. 

• The lender determines the enrollment fee based on the perceived level 

of transaction risk. 

What are the program’s 

strengths? 

• Typically does not involve third-party review of the lender’s credit 

underwriting and requires less intensive state management. 

• Fast turnaround. 

• Lender closes loans using their own documents. 

• A lender’s reserve fund accumulates with each CAP loan, so lenders 

have an incentive to originate more CAP loans and build a larger 

reserve. 

How Does a CAP Work? 

A CAP is a loan portfolio insurance program. Whenever a lender makes a CAP loan, the borrower/lender 

contributes to a reserve fund held by the participating lender. Using SSBCI funds, the state then matches 

the combined contribution of the borrower/lender. The state may add extra contributions using nonfederal funds for any targeted populations or geographies. Amounts in the lender’s reserve fund are 

available to cover any losses incurred in its portfolio of enrolled loans. 
US Department of Treasury

State Small Business Credit Initiative Program Profile 

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CAPITAL ACCESS PROGRAM 

State Small Business Credit Initiative

Operating Mechanics Description 

What kinds of lenders 

are eligible to 

participate? 

• Under SSBCI, any insured depository institution, insured credit union, or 

community development financial institution, as defined in section 103 

of the Riegle Community Development and Regulatory Improvement 

Act of 1994. 

• Lenders must demonstrate sufficient commercial lending experience 

and financial and managerial capacity to participate. 

Who originates loans in 

this program? 

• Participating lenders originate loans and establish the amount of the 

borrower contribution to the reserve account. 

Who has underwriting 

responsibility? 

• The lender has underwriting responsibility after the borrower eligibility 

requirements have been established; the state will monitor use of loan 

proceeds under the program. 

How are these loans 

monitored? 

• State monitoring responsibilities include verifying loan eligibility, 

reviewing use of loan proceeds, and approving lender claims in the case 

of losses; the state is not responsible for any losses exceeding the 

state’s contribution to the lender’s reserve fund. 

What kinds of fees may 

be charged? 

• The state may use SSBCI funds to match an up-front contribution by the 

borrower/lender to the reserve fund; under SSBCI, the contribution 

from the borrower/lender must range from 2% to 7% of the loan 

amount; the state may use SSBCI to match this fee. Typically, 

contributions range from 3% to 4%. 

• Program fees, or additional contributions from the state using nonSSBCI funds, are not dictated by this program. 

How long is a loan 

covered under CAP? 

• State CAPs may have a duration longer than that of the SSBCI program, 

and lenders will be able to pay losses associated with enrolled CAP 

loans as long as their accounts have available balances. 

• Typically, states allow a lender to hold the accumulated reserve fund as 

long as a CAP loan is outstanding. 

• Some states recapture their contribution to the reserve fund if the 

reserve fund is large compared to the amount of outstanding CAP loans. 

What percentage of the 

loan can be covered? 

• A maximum 14% contribution can be made for each loan into the 

reserve fund (7% maximum from the lender/borrower, plus 7% 

maximum matching from the state using SSBCI funds). 

• Losses are 100% covered, up to the amount in the lender’s reserve 

fund. 
US Department of Treasury

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Operating Mechanics Description 

What happens in the 

case of a default? 

• CAP lenders are entitled to file a claim for payment whenever a 

participating loan is written off. 

• Many states require that after payment of a claim by a lender, any 

recoveries from the borrower that exceed the amount needed to make 

the lender whole be deposited in the lender’s reserve fund. 

• A small number of states also provide that, in cases where the lender’s 

losses have been fully covered, the state will have the option of 

pursuing the borrower using the same recovery remedies available to 

the lender. 

How does the reserve 

fund work? 

• Payments from all parties—borrower, lender, and state—are deposited 

in a reserve fund. All losses on enrolled loans are paid from the reserve 

fund. 

• The reserve fund is typically maintained on deposit at the participating 

insured depository, with the state retaining co-ownership of the 

account. 

What happens if a lender 

depletes its reserves? 

• Early depletion is addressed in some states by allowing lenders to use 

payments from subsequently enrolled loans to pay prior losses. 

What is the state’s 

liability? 

• State liability is limited to the funds in each lender’s reserve fund; the 

state is also liable in the case of misused funds for potential federal 

clawback. 

Who are the Key Stakeholders and What are Their Roles? 

The stakeholders in a Capital Access Program include the state, financial institutions and an 

implementing agency/entity, if assigned by the state to manage the program. Implementing entities 

may include a specific department, agency, or political subdivision of the state, or an authorized agent 

of, or entity supervised by, the state. 

Stakeholder Role

What is the role of the 

state? 

• Markets the program and enrolls eligible financial institution lenders; as 

part of the enrollment process, takes due care to ensure that enrolled 

lenders have the capacity to originate and underwrite small business 

loans successfully. 

• Verifies the eligibility of individual loans submitted by the lenders and 

that proceeds will be used for acceptable business purposes, typically 

by borrower self-certification. 

• Uses SSBCI funds to make matching contributions to the loan reserve 

fund. 

• Approves claims submitted by the lender, and approves disbursements 

from the reserve fund for valid claims. 

What is the role of a 

lender? 

• Originates, underwrites, and services loans. 

• Submits required enrollment and claims forms to the state, and obtains 

assurances of eligibility from each borrower. 
US Department of Treasury

State Small Business Credit Initiative Program Profile 

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CAPITAL ACCESS PROGRAM 

State Small Business Credit Initiative

Stakeholder Role

What is the potential 

role of an implementing 

agency/entity? 

• Acts on behalf of the state to administer the CAP. 

• Assists with marketing the program in their region or community. 

• May also operate other credit support programs. 

What Kind of Operating Model Manages a CAP?

CAPs have very low operating costs. Many states staff their CAP with two staff; marketing and outreach 

staff would be additional. The key skills needed to start a program are the ability to market and enroll 

lenders into the program. Ongoing operational costs are minimal. The state must have the 

administrative resources to approve loan eligibility and verify claims. States may acquire these skills inhouse, through agents such as Economic Development Corporations, or through collaboration with 

other state programs. 

How Does CAP Help to Achieve a 10:1 Private Financing Ratio?

To be eligible for federal funding, a state is expected to reasonably demonstrate that, when considered 

with all other SSBCI programs of the state, such programs together have the ability to generate private 

lending of at least 10 times the new federal contribution amount, also known as the private leverage 

ratio, by December 31, 2016. Eligible private lending includes all loans or investments from a private 

source to an eligible borrower or eligible portfolio company, whether occurring at or subsequent to 

loan/investment closing, as well as any new infusions of cash by the borrower. CAPs, by their structure, 

have an implicit high leverage of private funds. As an example, if a CAP enrolls just two loans with the 

characteristics shown below, the “allocation time period private leverage ratio” for the CAP would be 

30:1, which would be derived as follows: 

Loan A Loan B Total

a. SSBCI Contribution to Reserve Fund $4,000 + $6,000 = $10,000

b. Private Financing $100,000 + $200,000 = $300,000

Private Leverage Ratio (b to a) 25:1 33.3:1 30:1

When a state proposes multiple programs for SSBCI funding, the state must present the “allocation time 

period private leverage ratio” as a weighted average that takes into account the amount of “private 

financing” attracted over the allocation time period and the amount of “SSBCI funds used” over the 

allocation time period. CAP is useful in achieving the state’s overall 10:1 if the state is also considering 

other credit support programs with a lower leverage ratio.

Where Has a CAP Worked Well? 

To date, 27 states have established CAPs to increase lending to small businesses. North Carolina’s 

successful program has been in operation since 1994. Key features of the North Carolina program were 

discussed in an SSBCI conference call on CAP and are summarized below. This information is not drawn 

from North Carolina’s SSBCI application. 
US Department of Treasury

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CAPITAL ACCESS PROGRAM 

State Small Business Credit Initiative

Highlights from North Carolina’s CAP 

• Overview: The CAP in North Carolina is managed by the Rural Center for Economic Development. 

The program targets all North Carolina counties and aims to allow more small businesses to expand 

their operations and create new jobs. 

• Fees: The program matches an up-front fee, typically 2% to 7%, paid by the lender and borrower. 

The combined amount is deposited into a pooled reserve fund held by the lender. The pooled fund 

includes matching fees from all NC-CAP loans made by the institution and covers losses in the event 

of a default. 

• Volume: From 1994 through 2008, the North Carolina CAP issued 1,850 loans for over $103 million. 

The reserve fund totaled $3.6 million with a leverage ratio of 28.5:1. 

• Eligibility: Loans generally range from $25,000 up to the maximum of $5 million. Both term loans 

and lines of credit are eligible. 

• Underwriting: Participating institutions are solely responsible for approving all loans, setting their 

terms and deciding a loan loss reserve fee to be shared by the lender and borrower and matched by 

North Carolina CAP. 

• Marketing: When the CAP was reinvigorated, North Carolina consulted the bankers association and 

state officials prior to choosing the CAP; both large banks and community banks have enrolled in the 

program. 

Who Can You Contact With Questions on CAPs?

Treasury has posted policy guidelines and application materials on its website, available here: 

http://www.treasury.gov/ssbci. Questions may be answered via phone (202-622-0713) or email at 

SSBCIquestions@treasury.gov.