U.S. Department of the Treasury

State Small Business Credit Initiative

State Small Business Credit Initiative Application

FAQs

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Frequently Asked Questions (FAQs)

General Information

1. What is the State Small Business Credit Initiative (SSBCI)? 

The SSBCI is a Federal program administered by the Department of the Treasury (Treasury) which was 

funded with $1.5 billion to strengthen state programs that support private financing to small businesses 

and small manufacturers. In conjunction with leveraged private financing, the SSBCI is expected to help 

spur up to $15 billion in lending to small businesses and manufacturers that are not getting the loans or 

investments they need to expand and create jobs. The SSBCI allows states, territories and eligible 

municipalities the opportunity to build upon or create successful models for state small business 

programs, including Capital Access Programs (CAPs), and Other Credit Support Programs (OCSPs) such as 

collateral support programs, loan participation programs, loan guarantee programs, and venture capital 

programs.

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2. How long will the SSBCI operate? 

The SSBCI is a one-time program of limited duration. The authorities and duties of the Secretary of 

Treasury to implement and ad006Dinister the program terminate on September 27, 2017. The 

obligations of participating states and territories to perform and report on progress will expire as 

outlined in the terms of the Allocation Agreement. Allocation Agreements between the Treasury and the 

participating states, territories and municipalities will expire on March 31, 2017.

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3. How much SSBCI funding is available to my state, territory, or eligible municipality? 

The enacting legislation for the SSBCI, the Small Business Jobs Act of 2010 (P.L. 111-240) (the Act) set 

out a formula that calculates the amount of funds available to each state, territory, and eligible 

municipality. For ease of reference, the SSBCI website includes the maximum amounts allocated by the 

Act to each state, territory, and eligible municipality. Please visit the website at 

http://www.treasury.gov/ssbci for more details.

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4. Can states, territories, and eligible municipalities work together to standardize their program rules 

for CAPs? 

Yes. CAPs are established and administered by each jurisdiction, individually. Several financial 

institutions have commented to Treasury that standardizing CAP rules across states, territories, and 

eligible municipalities would increase the program's efficiency and usability. States have the discretion 

to standardize several program characteristics that would increase uniformity across jurisdictions. For 

example, the states, territories, or eligible municipalities could use similar enrollment forms for financial 

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institutions to participate in the program; create similar enrollment forms for each loan; set the same 

rules for eligible borrowers and use of loan proceeds, which are consistent with the SSBCI Policy 

Guidelines; standardize the amount of borrower and lender payments to the CAP reserve fund which 

are consistent with the SSBCI Policy Guidelines; agree on the form and frequency of reporting from 

lenders; and use similar forms to document the recovery of any loan losses from the CAP reserve fund. 

The result could be savings for financial institutions on staff training, loan operations, back office 

recordkeeping, and management expenses. In the end, lower CAP costs should motivate more lenders 

to participate in the CAP and originate more loans.

More uniformity in CAP program design would also help smaller financial institutions because customers 

would become more familiar with the CAP rules and the administration by the state, territory or eligible 

municipalities would become more streamlined. The end result should be that CAPs becomes easier to 

implement for financial institutions of all sizes.

A collateral benefit is that creating more uniformity across CAPs could encourage financial institutions to 

participate in CAPs in smaller states. When CAP loan demand is uncertain, financial institutions are less 

likely to make the effort to participate. However, if the programs are standardized across large and small 

jurisdictions, financial institutions can offer CAPs in all locations with little extra cost. Ultimately, the 

final design of CAPs is left to the discretion of states, territories, and eligible municipalities.

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5. May states, territories, or eligible municipalities contract for the administration of their CAP or 

OCSP? 

Yes. The Act allows a participating state to enter contracts in which its SSBCI-supported program (CAP or 

OCSP) is administered by another state or by an authorized agent of, or entity supervised by, the state, 

territory or municipality. This option allows states, territories or eligible municipalities that are launching 

new programs to obtain the advantages of using an experienced public or private administrator. Using 

an experienced administrator may facilitate the launch of a new program and save expenses.

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6. Are funds transferred under SSBCI considered a grant or other type of federal assistance? 

No. Section 3003(c)(5) of the Act specifically states that funds transferred to states, territories, and 

eligible municipalities under the SSBCI program are not considered federal assistance for the purposes 

of subtitle V of title 31 of the United States Code. Because SSBCI funds are not considered federal 

assistance or a grant, many federal assistance or federal grant reporting requirements do not apply.

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7. How will Treasury exercise its discretionary authority to terminate the availability of funds that 

have not been disbursed to a Participating State within two years of the date of the Participating 

State’s Allocation Agreement? Posted July 15, 2013

Section 3003(c)(4) of the Small Business Jobs Act of 2010 provides the Secretary of the Treasury with 

discretionary authority to terminate the availability of SSBCI funds not transferred to a Participating 

State by the two-year anniversary of the date of the Allocation Agreement. Section 7.1 of the Allocation 

Agreement also sets out this requirement.

Treasury will deem any Participating State that submits its second disbursement request by 

June 30, 2015 and qualifies to receive that disbursement to have made sufficient progress in 

implementing its Approved State Programs. For such a Participating State, Treasury will not terminate 

the availability of any Allocated Funds that remain un-transferred as of that date, and the Participating 

State will retain access to the full amount of its Allocated Funds for the duration of the Allocation Time 

Period, which is March 31, 2017. For any Participating State that Treasury determines has not qualified 

for its second disbursement of Allocated Funds through a submission made by June 30, 2015, Treasury 

expects to conduct an analysis of the Participating State’s progress in implementing its SSBCI programs 

at that time to determine whether Treasury should exercise its authority to terminate the availability of 

un-transferred funds.

This policy does not affect Treasury’s authority to determine that a general event of default has 

occurred under Section 6.1 of the Allocation Agreement and to exercise the remedies set forth in 

Section 6.2 of the Allocation Agreement.

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Application Related Questions

1. Who is eligible to apply for funds? 

Eligible applicants include all states of the United States, the District of Columbia, the Commonwealth of 

Puerto Rico, the Commonwealth of Northern Mariana Islands, Guam, American Samoa, and the United 

States Virgin Islands; and under the circumstances described in the Act, a municipality of a State of the 

United States to which the Act has given a special permission under Section 3004(d) of the Act to apply.

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2. Under what conditions may a municipality apply for funding? 

A municipality may apply for funding if the state in which the municipality is located failed to file a 

Notice of Intent by November 26, 2010, or if the state fails to submit an application for funding by June 

27, 2011. Note that as of May 2010, only the states of Wyoming and North Dakota have not filed a 

Notice of Intent.

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3. What are the eligibility criteria for programs under the SSBCI? 

States, territories, and eligible municipalities may use SSBCI funds for CAPs as well as other credit 

support programs (OCSPs).

To be eligible for funding, a CAP is required to:

i. Provide portfolio insurance for business loans based upon a separate loan-loss reserve fund for 

each financial institution;

ii. Require insurance premiums to be paid by the financial institution lenders and by the business 

borrowers to the reserve fund in order to have their loans enrolled in the reserve fund;

iii. Provide for contributions to be made by the state, territory , or municipality to the reserve fund 

in amounts at least equal to the sum of the amount of the insurance premium charges paid by 

the borrower and the financial institution to the reserve fund for any newly enrolled loan; and

iv. Provide portfolio insurance solely for loans not exceeding $5 million to borrowers with 500 or 

fewer employees.

To be eligible for funding, an OCSP must demonstrate:

i. $1 of public support will result in at least $1 of new private financing;

ii. Individual guarantees will be limited to loans of no greater than $20 million and to borrowers 

with 750 employees or fewer; and

iii. The program will target borrowers with 500 or fewer employees and seek to make loans with an 

average principal amount of $5 million or less.

In addition, states, territories, and eligible municipalities must demonstrate a reasonable expectation 

that, when considered together, its eligible CAP and eligible OCSPs will result in a minimum of $10 of 

new small business lending for each $1 in Federal funds. Please refer to the SSBCI Policy Guidelines for 

further information and examples.

The application for CAPs and OCSPs must also include a report stating how the state, territory, or eligible 

municipalities plan to use SSBCI funds to provide access to capital for small businesses in low- and 

moderate-income, minority, and other underserved communities, including women- and 

minority-owned small businesses.

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4. What is the process for applying for funds? 

Any state, territory, or eligible municipality that establishes a new, or has an existing, CAP or OCSP that 

meets the eligibility criteria may apply for SSBCI funds by accessing the application and its attachments 

on the SSBCI website at http://www.treasury.gov/ssbci. Completed applications from states and 

territories must be received by Treasury by 5:00 PM ET on June 27, 2011. Applications from eligible 

municipalities must be received by Treasury by 5:00 PM ET on September 27, 2011. Municipalities 

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interested in applying should look for further information on the SSBCI website, beginning in late-June.

Treasury will review the applications in the order in which they are received.

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5. Must an applicant have an existing SSBCI-eligible program in order to be eligible to apply? 

No. If a state, territory, or eligible municipality does not have an existing CAP or OCSP, officials may 

establish one in order to obtain SSBCI funding. Treasury will provide technical assistance to applicants 

that are in the process of creating or starting programs.

The Act requires that a CAP or OCSP be fully positioned, within 90 days of the execution of the Allocation 

Agreement, to act on providing the kind of credit support that the CAP or OCSP program was established 

to provide.

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6. Can state, territory, municipal, and private funds be used in combination with SSBCI funds to fund 

CAP reserve funds? 

Yes. CAP reserve funds are eligible to receive SSBCI funds in an amount equal to the sum of the amount 

of the insurance premium charges paid by the small business borrowers and by the financial institution 

lender. The state, territory, or municipality may use any other sources of funds to provide additional 

support to the reserve fund. However, the SSBCI funds cannot be used to match any amount in excess of 

the sum of the borrower and financial institution lender contributions.

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7. How can an Applicant use public funds in an OCSP? 

OCSPs may use available public funds, subject to the SSBCI Policy Guidelines:

• Each of the OCSPs must meet the 1 to 1 private leverage eligibility requirement and, taken together, 

all the approved SSBCI programs must demonstrate the ability to meet the 10 to 1 leveraging 

expectation.

• Private lenders or investors must have a meaningful amount of capital resources at risk, which is 

consistent with the SSBCI Policy Guidelines.

• SBA-guaranteed loans and other federally guaranteed loans may not be credit- enhanced by OCSPs.

Due to the variety of program structures that are possible, Treasury reserves the right to evaluate 

applications on a case-by-case basis.

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8. Question 1E of the Application asks for documents showing that all legal actions pursuant to 

applicable law have been taken that are necessary to enable the designee to implement the 

Applicant's proposed program(s). What should we include in our response? 

A recommended response to Question 1E includes a narrative statement that describes the authority 

upon which the designated agency is able to enter into binding agreements on behalf of the state, 

territory, or eligible municipality with Treasury. This will typically involve discussion of the entity’s 

charter and express authorizations from the state to act on its behalf through a state resolution or other 

instrument. Secondly, the narrative should discuss the unique aspects of the state, territory, or 

municipal budget process and how funds transferred from Treasury for the purposes of this program will 

be deployed for the uses in the approved application. In some states, this involves the passage of a 

budget resolution in the state legislative body. Responses to this question alert Treasury to potential 

concerns and unique aspects of state law that may need to be addressed during closing.

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9. The Application requires a designation letter. What should it say? 

The designation letter should come from governor of the state or the chief executive of the territory or 

municipality. This letter must expressly state that: (1) the governor or chief executive has designated the 

department, agency or political subdivision named in the application to accept the SSBCI allocated 

funds; (2) the designated entity is responsible for the implementation of the programs included in the 

application; (3) the designated entity will be responsible for overseeing the programs and contractors (if 

the applicant expects to use contractors ) and is responsible for all reporting requirements under the 

allocation agreement; (4) the designated entity has all necessary legal authority to enter into an 

allocation agreement with Treasury.

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10. The Application includes standard non-construction assurances in Form SF-424B. Who must make 

these assurances? 

The assurances in Form SF-424B apply only to the applicant (as distinguishable from the contracting 

entity that may be identified in the application). The assurances in SF-424B do not apply to the financial 

institution lenders or investors in small businesses nor to the small businesses that receive loans and 

investments. It may be helpful to note that with respect to item 5 of the SF-424B, the Act is not one of 

the 19 specified statutes or regulations that would make the Intergovernmental Personnel Act 

applicable. With respect to item 9, the Act is not one of the Davis-Bacon Act related acts and therefore 

the prevailing wage requirements contained therein are not applicable to the use of SSBCI funds.

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11. How should an applicant document its plans to use SSBCI funds to provide access to capital for 

small businesses in low- and moderate-income, minority, and other underserved communities, 

including women- and minority-owned small businesses? 

Question 2D in the application requires that a state, territory, or eligible municipality applying for SSBCI 

funds provide a narrative describing its plan to provide access to capital to the above-referenced 

communities. 

An applicant's plan should be sufficient to allow the Treasury to evaluate whether the plan is substantive 

and relevant to local market conditions. Plans will vary due to local circumstances and precisely which 

strategies a state decides to use in order to provide access to capital for small businesses. The exact 

features of the plan are left to the applicant’s discretion. An acceptable plan will:

• Describe how the applicant will provide access to capital for these small businesses.

The applicant may have different strategies for different groups referenced in the SSBBCI statute. By 

way of example, some applicants plan to provide access to capital through the design of the program 

itself (e.g., providing reduced pricing or enhanced risk mitigation as an incentive for targeted 

geographies or populations). Other applicants provide access to capital through a concerted campaign 

to disseminate information through organizations that have business relationships with target groups 

(e.g., seminars and one-on-one counseling; advertisements in specialized media; periodic e-mailed 

newsletters that reach target populations).

The plan is part of the application that is incorporated by reference in the Allocation Agreement 

between Treasury and the participating state, territory, or municipality. 

• Describe how the applicant will monitor performance relative to the plan. An acceptable plan should 

include some way for the applicant to periodically assess if the plan is on-track over the course of the 

allocation time period. For example, some applicants track the actual outreach activities that have 

occurred (e.g., how many seminars were held and how many businesses attended). Some applicants 

monitor the actual loan volume to targeted groups or to low- and moderate-income communities. Loan 

results may be compared to prior years' results, to the region's business demographics, or to private 

lending in general. Treasury does not require participating states, territories or municipalities to 

subsequently report on their plan, but they should maintain the monitoring records with the other 

program documents.

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12. How can applicants demonstrate that they will achieve the 10:1 leverage ratio by the end of the 

allocation period? 

As described in further detail in the SSBCI Policy Guidelines, in order for OCSPs to be eligible for SSBCI 

funding, the applicant must demonstrate a "reasonable expectation" that, when considered with all 

other CAPs and/or OCSPs proposed for SSBCI funding, such programs together have the ability to use 

federal contributions to generate small business lending at least 10 times the SSBCI contribution 

amount. Because private leverage ratios for CAP programs tend to be quite high, most applicants with 

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both CAPs and OCSPs will meet the private leverage ratio expectation in the first year of the allocation 

period (please see the SSBCI Policy Guidelines for more information about how to calculate a weighted 

average private leverage ratio when the applicant intends to operate both CAPs and OCSPs).

Treasury recognizes that some OCSPs, by design, may not meet the 10:1 leverage expectation during the 

first calendar year of the allocation period. Applicants should demonstrate in their application how the 

OCSP programs will recycle SSBCI funds, attract subsequent private financing, and generate program 

income, in order to achieve the 10:1 private leverage ratio expectation by the end of the allocation time 

period's reporting period, which is December 31, 2016. Please refer to the SSBCI Policy Guidelines for 

examples. 

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13. When calculating the 10:1 leverage expectation for private financing, may a participating state, 

territory or municipality count SBA-guaranteed loans or other financing that is credit-enhanced by 

federal, state or local incentives? 

Yes. A participating state, territory or municipality may count SBA-guaranteed loans or other financing 

that is credit-enhanced by federal, state or local incentives provided that (a) the financing is caused by, 

or is the result of, an SSBCI-supported transaction, (b) the capital comes directly from a private entity, 

and (c) the lender or investor has at least some of its own capital at risk.

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Post-Application / Review Related Questions

1. What is the likelihood of an application being approved? 

The application for SSBCI funding is not a competitive award process. Treasury will approve all 

applications that meet the criteria set forth in the Act and in the SSBCI Policy Guidelines. To expedite 

processing, applicants should make every effort to ensure that their applications are complete and 

include all supporting documentation, as applicable.

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2. Once a state, territory, or municipality receives an Allocation Agreement, how long does it take to 

receive the SSBCI funds? 

The allocated funds are available in thirds. The transfer of the first third will occur immediately following 

the receipt of the fully signed Allocation Agreement. If the state, territory, or eligible municipality plans 

to use the SSBCI funds as collateral for a qualifying loan or swap funding facility, the entire allocation is 

available to be transferred in a single lump sum.

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3. How does a Participating State make a request for its second or third disbursement of Allocated 

Funds? 

A Participating State may make a request to receive its second or third disbursement of funds once the 

Participating State is able to certify to Treasury that the Participating State has expended, transferred, or 

obligated at least 80% of the prior disbursement to, or for the account of, an Approved State Program. 

As part of this certification, the Authorizing Official for the Participating State must also certify to 

Treasury that the Participating State is in compliance with all terms of the Allocation Agreement, SSBCI 

Policy Guidelines, and the representations and warranties made in both the Allocation Agreement and 

the SF-424B (Assurances Non-Construction). Exhibit 2-1 in Annex 2 of the Allocation Agreement has a 

sample certification form that Participating States may use to make this request. Participating States 

should transmit their certification and any other documents related to their request, via email to the 

SSBCIApplications@treasury.gov mailbox.

Upon receipt, Treasury will review the request and accompanying certification for completeness. 

Treasury may ask for records or further information that substantiates any aspect of the Participating 

State's certification.

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4. Does Treasury have any guidance on how a Participating State can determine whether it has 

expended, transferred or obligated SSBCI funds for the purposes of making a request for a subsequent 

disbursement of SSBCI funds? 

Below is general guidance on how Treasury will review a Participating State's certification that it has 

expended, transferred or obligated SSBCI funds. As noted above, Treasury may request that a 

Participating State provided documentary evidence to substantiate its certification.

• Expended— SSBCI funds that have been used to pay charges that have been incurred either on a cash 

or accrual basis by or for an Approved State program.

Examples of expended funds include:

a) SSBCI funds that have been deposited with a lender to cover the federal contribution to a Capital 

Access Program reserve fund;

b) SSBCI funds that have been disbursed to a specific borrower (or disbursed to a specific lender as part 

of a commitment to a specific transaction) as part of a loan participation, collateral support, or direct 

lending program;

c) SSBCI funds that have been invested in specific small businesses, pursuant to a venture capital 

investment; or,

d) SSBCI funds that have been disbursed allowable administrative expenses.

• Obligated—SSBCI funds that have been committed to pay for the amounts of orders placed, contracts 

awarded, goods and services received, and similar transactions during a given period that will require 

payment by the Approved State Program during the same or a future period.

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Examples of obligated funds include:

a) SSBCI funds that have been committed, pledged, or otherwise promised, in writing, to a specific 

borrower as part of a loan participation, collateral support, or direct lending program;

b) SSBCI funds that have been committed, pledged, or otherwise promised, in writing as part of a 

venture capital investment transaction (e.g., a promissory note);

c) SSBCI funds that have been set aside to cover obligations arising from loan guarantees, loan 

participations, or collateral support agreements as part of an approved program; or,

d) SSBCI funds that have been committed, pledged, or promised in writing for allowable administrative 

expenses (e.g. an executed contract for services).

• Transferred—SSBCI funds that have been transferred by the state, territory, or municipality receiving 

SSBCI funds to the designated/implementing agency, or the contracting entity, that is charged with 

administering the day-to-day operations of the program, as a reimbursement for actual expenses 

incurred or when there is a clearly documented actual and immediate cash need to fund a loan or 

investment to an eligible small business or to pay for any allowable administrative expenses

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5. Section 4.10(b) of the Allocation Agreement indicates that the Participating State must notify 

Treasury in writing of, "any material adverse change in the condition, financial or otherwise, or 

operations of the Participating State." What does this include? 

For the purposes of the Allocation Agreement, the notice requirement of Section 4.10(b) of the 

Allocation Agreement is triggered by the following events:

1) The elimination or termination of an Approved State Program;

2) The addition of one or more new State programs;

3) A material change in the scope or purpose of an Approved State Program. Treasury maintains the 

discretion to determine materiality of any changes in scope or purposes that are proposed by a 

Participating State;

4) The reapportionment and transfer of a Participating State's allocated funds among Approved State 

Programs, when the cumulative amounts transferred exceeds 20 percent of the Participating State's 

total allocation;

5) A change in the identity of the State agency or contracting entity proposed to implement the 

Approved State Programs from the State agency that is identified in Section 5.1 or Annex 1 of the 

Allocation Agreement or a merger of State agencies or contracting entities is proposed that substantially 

alters the organizational structure of the implementing Participating State agency or contracting entity; 

or

6) Extenuating circumstances requiring extensions to the reporting schedule established in Annex 5 of 

the Allocation Agreement.

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6. Our State agency designated for implementing the approved State program would like to use a 

contractor or an independent State authority to administer all or part of the approved State program. 

Do we need to inform Treasury? 

Yes. If your designated implementing agency plans to use a contractor or an independent State 

authority (i.e., a "third-party entity") to administer all or part of the approved State program, then the 

terms of Article IV and Article VI of the Allocation Agreement must be extended to and applied to the 

third-party entity.

For the purposes of satisfying this requirement, Annex 1 of the Allocation Agreement will include (or will 

be amended to include) a provision that requires the participating State to enter into a written 

agreement with the third-party entity that will be administering all or part of the approved State 

program. That agreement must extend and apply the provisions of Article IV and Article VI of the 

Allocation Agreement to the third-party entity, and require the third-party entity to comply with the 

provisions of those articles of the Allocation Agreement. It is sufficient that the participating State 

maintain a record of its written agreement that extends and applies the provisions of Article IV and 

Article VI of the Allocation Agreement to the third-party entity.

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7. What kind of administration of all or part of an approved State program requires an amendment to 

our Allocation Agreement? 

Administration of all or part of the approved State program that is performed by third-party entity will 

generally require the inclusion in Annex 1 of the Allocation Agreement a provision extending and 

applying the provisions of Article IV and VI of the Allocation Agreement to the third-party entity (see 

above). By "administration of all or part of the approved State program", Treasury means performing 

such fundamental program functions as one or more of the following: program marketing; transaction 

underwriting and analysis; making loan or investment recommendations; selecting recipients of funds; 

generating and holding loan or investment documentation; disbursing funds; servicing loans; financial 

accounting; collecting reports from fund recipients; and/or preparing reports to be submitted to the 

implementing agency. Not all third party entities that a State may engage to assist in the Approved State 

program are administering entities that require an amendment to a State's Allocation Agreement. For 

example, for purposes of this requirement, "administration of all or part of the approved State program" 

is not intended to include services under contracts for back-office support, such as IT support, HR 

support, or a property leasing. Treasury will make the final determination, in its sole discretion, but 

based on the representation of the Participating State as to the nature and function of the third-party 

entity, if this provision shall be included in Annex 1 of the Allocation Agreement.

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8. What are the consequences of an event of default under the Allocation Agreement?

Updated July 15, 2013 to reflect SSBCI’s procedure for disclosing compliance issues that could not be

resolved by a Quarterly Report due date. 

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Article VI of the Allocation Agreement should be reviewed carefully to understand the specific details 

and potential consequences of the events of defaults. 

Generally, Section 6.1 of the Allocation Agreement identifies any materially inaccurate, false, 

incomplete, or misleading statement of fact made by a Participating State in its Application, the 

Allocation Agreement, or any report or instrument delivered under the Allocation Agreement to be an 

event of default. 

Section 6.1 also identifies any failure to comply with any term of the Allocation Agreement to be an 

event of default. A failure to comply with a term of the Allocation Agreement includes, but is not limited 

to, a misuse of funds, failure to obtain necessary certifications, or failure to submit a required report in a 

timely fashion. As explained in Post-Award / Compliance FAQ # 10, Treasury may provide a Participating 

State with a revised “Certification on Use-of-Allocated Funds” (Exhibit 4-1 to Annex 4 of the Allocation 

Agreement) to allow the Participating State to disclose non-compliance issues that the State could not 

successfully resolve by a Quarterly Report due date. The Participating State remains responsible for 

resolving any non-compliance issue in conformance with SSBCI program requirements and bringing its 

Approved State Program or Programs into full compliance with SSBCI requirements as soon as possible.

Section 6.2 of the Allocation Agreement provides that if Treasury finds that any of these events of 

default has occurred, Treasury may withhold any future disbursements of Allocated Funds to the 

Participating State pending correction, and/or reduce, suspend, or terminate Treasury’s commitment to 

make disbursements of Allocated Funds to the Participating State.

Section 6.3 of the Allocation Agreement provides that if the Treasury Inspector General finds, through 

an audit, any intentional or reckless misuse of Allocated Funds by the Participating State, then Treasury 

shall find the Participating State to be in default of the Allocation Agreement. Section 6.4 of the 

Allocation Agreement provides, in that case, Treasury shall recoup the misused funds that have been 

disbursed to the Participating State. In addition, based on the Inspector General’s findings, Treasury 

may also impose additional the default remedies under Section 6.2 of the Allocation Agreement, which 

include the option to withhold any further disbursements and/or reduce, suspend or terminate 

Treasury’s commitment to make disbursements of Allocated Funds to the Participating State.

Section 6.3 of the Allocation Agreement also provides that if the Treasury Inspector General finds, 

through an audit, any intentional misstatement by a Participating State in a report issued to Treasury 

under the Act, then Treasury shall find the Participating State to be in default of the Allocation 

Agreement. Section 6.4 of the Allocation Agreement also provides that, in that case, Treasury shall

terminate Treasury’s commitment to make disbursements of Allocated Funds to the Participating State 

and find the State ineligible to receive any additional funds under the Act.

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9. Section 6.3(a) of the Allocation Agreement specifies that there are additional remedies imposed 

upon a Participating State, "In the event of a Treasury Inspector General audit finding of either: 

intentional or reckless misuse of Allocated Funds by the Participating State . . . ." What does 

"intentional or reckless misuse" mean? 

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Section 6.3(a) of the Allocation Agreement implements Section 3003(b)(1)(C)(ii) of the Small Business 

Job Act of 2010 (Pub. L. 111-240) (Act).1 This section of the Act effectively authorizes the Treasury 

Inspector General to determine, through an audit of the Participating State, not only if funds were 

misused, but also if the misuse was reckless or intentional. 

If the Treasury Inspector General makes such a finding of intentional or reckless misuse, then Treasury 

shall declare the Participating State to be in default of the Allocation Agreement. At that time, Treasury 

will recoup the funds that were intentionally or recklessly misused. Additionally, the Participating State 

is subject to the contractual remedies of Section 6.2 of the Allocation Agreement for any misuse of funds 

(regardless of intentionality or recklessness). These remedies include the option to withhold any further 

disbursements and/or reduce, suspend or terminate Treasury's commitment to make future 

disbursements of Allocated Funds to the Participating State.

In consultation with the Treasury Inspector General, and applying standards used in analogous 

situations, Treasury has developed the following definitions of which Participating States should be 

mindful. 

"Misuse" shall mean: (1) any use of Allocated Funds under the control of the Participating State or its 

administering entities identified in Annex 1 of the Allocation Agreement that is not an authorized use or 

is a prohibited use under the Act, the Allocation Agreement, or the SSBCI Policy Guidelines; (2) or any 

act or omission that enables other parties, including administering entities identified in Annex 1 of the 

Allocation Agreement, to misuse Allocated Funds, as described in clause 1.

To determine the authorized and prohibited uses of Allocated Funds, please see Section 4.2, Section 4.3, 

and Section 4.4 of the Allocation Agreement. 

Please note that Section 4.2 of the Allocation Agreement states that the Participating State shall only 

use the Allocated Funds for the purposes and activities specified in the Allocation Agreement. Please 

also note that Section 8.2 states that the Allocation Agreement includes: the Application and the 

attachments, exhibits, appendices and supplements to the Application; the Allocation notice letter, 

between the Participating State and Treasury with respect to the obligation of funds necessary to 

provide transfers to the Participating State; and any attachments, schedules, annexes, appendices and 

supplements to the Allocation Agreement. In addition, Section 4.6 of the Allocation Agreement includes 

the Participating State's covenant to comply with SSBCI Policy Guidelines published by Treasury on its 

website at www.treasury.gov/ssbci, including any SSBCI Policy Guidelines and national standards that 

are established by Treasury after the date of the Allocation Agreement; and the standards for financial 

management systems, including internal control requirements, specified in the grants management 

common rule at § __.20. 

 

1 The relevant section reads, "The allocation agreement between the Secretary and the participating 

State shall provide that the Secretary shall recoup any allocated Federal funds transferred to the 

participating State if the results of the audit include a finding that there was an intentional or reckless 

misuse of transferred funds by the State.

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Please also note that Section 4.1 of the Allocation Agreement includes the Participating State's covenant 

to comply with the Act and applicable Federal, State, and local laws, regulations, ordinances, and OMB 

Circulars, including, but not limited to, the regulations at 31 C.F.R. Part 21, related to lobbying.

For the purposes of illustration, the following are non-exclusive examples of misuse of funds:

• Using Allocated Funds for a State program that is not an Approved State Program;

• Expending Allocated Funds for an Approved State Program in excess of the levels permitted by 

Annex 1 of the Allocation Agreement;

• Expending Allocated Funds for the purposes of administrative expenses in excess of the 

amounts specified in Annex 3 of the Allocation Agreement;

• Permitting the enrollment of a loan to a small business in excess of the maximum loan sizes 

specified in the Act and the SSBCI Program Guidelines;

• Permitting the enrollment of a loan that is not for a business purpose or that is used to finance 

activities prohibited by the Act, the Allocation Agreement, or the SSBCI Policy Guidelines;

• Permitting the enrollment of a loan that has been made to a prohibited party, such as an 

executive officer, director, or principal shareholder of the financial institution lender; and

• Expending Allocated Funds for a purpose or to an entity after being advised by Treasury that 

such expenditure is not an authorized use of funds or is prohibited by the Act, the Allocation 

Agreement, or the SSBCI Guidelines. 

“Intentional misuse of funds” shall mean: a use of Allocated Funds that the Participating State and/or 

its administering entity/ies knew was unauthorized or prohibited. An intentional misuse of funds may 

be a single instance or a series of instances.

“Reckless misuse of funds” shall mean: a use of Allocated Funds that the Participating State or its 

administering entity/ies should have known was unauthorized or prohibited. A “reckless misuse of 

funds” is a highly unreasonable departure or willful disregard from the standards of ordinary care, and 

may be a single instance or a series of instances.

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10. If a Participating State has a known, but unresolved non-compliance issue, must the State submit a 

Certification on Use-of-Allocated Funds with its Quarterly Report, which requires the Authorized State 

Official to certify that the Participating State is fully compliant with all SSBCI requirements? 

Posted July 15, 2013

Treasury recognizes that a non-compliance issue may be discovered through a Participating State or 

Treasury compliance review or through an OIG audit and that the Participating State may not be able to 

fully resolve the issue before a Quarterly Report due date.

In these cases, a Participating State should contact Treasury as soon as practicable to discuss the issue. 

Treasury will provide a revised Certification on Use-of-Allocated Funds (Exhibit 4-1 to Annex 4 of the 

Allocation Agreement) for disclosure of non-compliance issues to be submitted with the Quarterly 

Report. The Participating State also must include its strategy for preventing and monitoring for issues of 

a similar kind going forward in the revised Certification on Use-of-Allocated Funds and after submission 

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must provide updates on its efforts to resolve each issue as well as written confirmation that specifies 

the date and method of resolution. Please note that a Participating State’s disclosure of a 

non-compliance issue does not relieve the State of responsibility for resolving the issue. The 

Participating State remains responsible for resolving any non-compliance issue in conformance with 

SSBCI program requirements and bringing its Approved State Program or Programs into full compliance 

with SSBCI requirements as soon as possible. Please contact your Relationship Manager with any 

questions.

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Program Income and Administrative Expense Questions

1. What is program income and how is it calculated? 

Program income is gross income received by the participating state, territory or municipality, including 

any returns on capital that is directly generated by an SSBCI- supported activity or as a result of the 

SSBCI funds. Interest, fees, refunds or other types of gross income earned by financial institutions, 

private venture capital funds, or private angel investor networks on loans or investments made using 

SSBCI funds are not considered program income.

When income is generated by an approved CAP or OCSP that includes non-SSBCI funds, only the pro-rata 

share of program income directly attributable to SSBCI funds is considered program income. For 

example, in programs in which 60% of program funds came from private, non-SSBCI dollars, only 40% of 

the gross income (the SSBCI generated amount) of the gross income shall be considered program 

income.

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2. How can program income be used? 

Program income must be employed for any allowable purposes for which the allocated and transferred 

SSBCI funds may be used, including use for administrative expenses. Program income is not subject to 

the 3% and 5% limitations of use for administrative purposes that the transferred SSBCI funds are 

subject to under Section 3003(d)(3)(c) of the Act. Further, program income is not restricted for use by 

the same SSBCI funds-supported activity that generated the program income. Instead, the program 

income from one approved CAP or OCSP but may be used for any approved CAP or OCSP.

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3. How may I pay for my administrative expenses? 

There are two ways to fund administrative expenses: (1) out of allocated funds, and (2) out of program 

income, including any administrative fees paid to the participating state, territory or municipality.

The Act establishes strict limitations on the use of allocated funds for administrative expenses. In the 

case of the first 1/3 transferred, an amount not exceeding five (5) percent of the transferred amount 

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may be employed for allowable administrative expenses. Administrative charges to subsequent 

transfers are not to exceed three (3) percent of the transferred amount.

To supplement these amounts, states, territories and municipalities may charge fees for program 

administration. Proceeds from these fees, as well as any interest income or other program income, may 

be used for allowable administrative expenses.

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Post-Award / Compliance Questions

1. Are there any recoupment provisions in the Allocation Agreement for the allocated funds? 

Yes. Section 6.4 of the Allocation Agreement mandates that if the participating state, territory or 

municipality is found in default of the Allocation Agreement, Treasury may recoup misused funds. Other 

sections of the Allocation Agreement disclose other circumstances that will limit access by a state, 

territory, or municipality' access to the allotted funds. Section 6.2 of the Allocation Agreement explains 

the discretionary remedies available to Treasury if the state, territory or municipality is found in default 

of the agreement. These remedies include the authority to withhold any future disbursements pending 

resolution of the event of default and the authority to reduce or suspend future disbursements. Events 

of default are listed in Section 6.1 of the Allocation Agreement and include making inaccurate, false or 

misleading information in the application or Allocation Agreement and failure to comply with any part of 

the Allocation Agreement, including failure to submit timely and accurate reports. Lastly, Section 7.1 of 

the Allocation Agreement covers termination of availability of SSBCI funds.

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2. Under what circumstances may a financial institution lender use SSBCI funds to support a new 

extension of credit for the purpose of satisfying a prior obligation to the same financial institution or 

an affiliate? Updated November 27, 2013 to reflect SSBCI position on loan purchases. 

Financial institution lenders are generally prohibited from refinancing an existing outstanding balance or 

previously made loan, line of credit, extension of credit or other debt owed by a small business 

borrower already on the books of the same financial institution (or an affiliate) into an SSBCI-supported 

CAP or OCSP. However, a financial institution lender may use SSBCI funds to support a new extension of 

credit that repays the amount due on a matured loan or line of credit when all the following conditions 

are met:

 the new loan or line of credit includes the advancement of new monies to a small business 

borrower (excluding closing costs);

 the new credit supported with SSBCI funding is based on a new underwriting of the small 

business's ability to repay and a new approval by the lender/investor; 

 proceeds from the new credit may only be used to satisfy the outstanding balance of a loan 

or line of credit that has already matured or otherwise termed and the prior debt was used 

for an eligible business purpose, as defined by the SSBCI Policy Guidelines; and,

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 the new credit has not been extended for the sole purpose of refinancing existing debt 

owed to that same financial institution lender. 

SSBCI recommends that when a Participating State enrolls a loan that repays principal due under a loan 

previously made by the same financial institution or its affiliate, the Participating State or the financial 

institution lender should maintain documented substantiation that these four criteria were met. 

The limitation on refinancing does not prohibit a financial institution lender from originating a new loan 

under an approved program and subsequently refinancing the same loan under any approved 

program. Additionally, the limitation also does not prohibit a financial institution lender from enrolling 

or refinancing previously made loans from another, non-affiliated financial institution into an approved 

program. When a Participating State uses SSBCI funds to purchase a loan from another, non-affiliated 

financial institution, the state must make a determination that the transaction is beneficial to the small 

business borrower. 

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3. What are the restrictions on borrowers' use of loan proceeds? 

Updated August 5, 2013 to reflect SSBCI’s position on using SSBCI funds to purchase goodwill. 

Financial institution lenders must obtain an assurance from eligible borrowers or eligible investees that 

loan or investment proceeds from an approved program will only be used for business purposes 

including start-up costs, working capital, business procurement, franchise fees, equipment, inventory, 

and the purchase, construction, renovation or improvements of an eligible place of business. SSBCI 

funds may be used to purchase any tangible or intangible assets except for goodwill. Purchases of real 

estate (commercial or otherwise), securities or the acquisition or holding of any other real property for 

passive investment purposes, and lobbying activities are not considered eligible business purposes 

under an SSBCI-approved program. Furthermore, loan or investment proceeds may not be used to pay 

delinquent federal or state tax debts unless a repayment plan is in place and in no circumstances may be 

used to repay taxes held in trust or escrow (e.g., payroll or sales taxes). Loan or investment proceeds 

may not be used to reimburse funds owed to or purchase any portion of the ownership interest of any 

owner of the business. The prohibition on purchasing any portion of the ownership interest of an owner 

proscribes the acquisition of the shares of a company or the partnership interests of a partner when the 

proceeds of the loan or investment directly supported by SSBCI funds will go to any existing owner or 

partner.

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4. The SSBCI Policy Guidelines require that at the closing of a loan or investment, that each small 

business borrower furnish an assurance that includes, among other things, that loan or investment 

proceeds will not be used for passive real estate investment. What is SSBCI's definition of "passive 

real estate investment"? 

SSBCI has developed a definition of "passive real estate investment" in consultation with the Small 

Business Administration (SBA). SSBCI considers loan or investment proceeds to be used for "passive real 

estate investment" purposes when the proceeds from the loan or investment are used by an eligible 

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small business to invest in real or personal property acquired and held primarily for sale, lease, or 

investment. 

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5. Can a small business borrower still deliver the assurance regarding passive real estate investment if 

the small business leases any portion of a building constructed, acquired or renovated with proceeds 

from an SSBCI-supported loan or investment? 

If proceeds from an SSBCI supported loan or investment are used in the construction of a new building, 

the eligible small business must occupy and use no less than 60% of the total rentable property 

following construction. If proceeds are used in the acquisition, renovation or reconstruction of an 

existing building, the borrower may permanently lease up to 49% of the rentable property to one of 

more tenants, if the eligible small business also occupies and uses no less than 51% of the total rentable 

property within 12 months following the real property acquisition. For example, Smith Bakery may use 

the proceeds of an SSBCI-supported loan to purchase an existing building with 4,000 square feet of 

rentable property that is currently leased to three businesses if at least 2,040 (51%) square feet will be 

occupied by the bakery itself within 12 months of acquiring the building. 

Under either scenario, if an eligible small business chooses to lease an allowable portion of the rentable 

square footage to a tenant, the Participating State has the responsibility to ensure that the occupancy 

requirements of the eligible small business are met and supported by substantiating documentation, 

which may include lease agreements, blueprints, or similar documentation. Additionally, 

SSBCI-supported loan or investment proceeds may not be used to improve or renovate any of the 

rentable property that is leased to a third party.

SSBCI considers "rentable property" to be the total square footage of all buildings or facilities used for 

business operations excluding vertical penetrations (stairways, elevators, and mechanical areas that are 

designed to transfer people or services vertically between floors), and including common areas (lobbies, 

passageways, vestibules, and bathrooms). Rentable property excludes all outside areas. 

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6. Are there any exceptions to the use of proceeds prohibition on passive real estate 

investment? What about an entity or trust that does not directly engage in business operations, such 

as a real estate holding company, receiving an SSBCI-supported loan or investment for the purposes of 

acquiring real property? 

In consultation with the SBA, SSBCI does permit an exception to the prohibition on passive real estate 

investment if an eligible passive company acquires and holds real property using SSBCI-supported loan 

or investment proceeds where 100% of the rentable property is subsequently leased to one or more 

operating companies. An eligible passive company can take any legal form or ownership, but it is 

typically a small entity or trust which does not engage in regular and continuous business activity, and 

which leases real or personal property to an operating company for use in the operating company's 

business. An operating company is generally actively involved in conducting business operations that is 

currently or about to be located on real property owned by an eligible passive company, or using, or 

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about to use in its business operations, personal property owned by an eligible passive company. To 

meet the exception identified above, the following criteria must also be met:

• Both the eligible passive company and the operating company are eligible small businesses that 

meet all borrower or investor criteria established by the SSBCI Policy Guidelines; While 100% of 

the rentable property acquired and held using proceeds from the SSBCI-supported loan or 

transaction to the eligible passive company must be leased to one or more operating 

companies, an operating company may subsequently sublease no more than 49% of the total 

rentable square footage (in the case of an existing building, or no more than 40% in the case of

new construction) to one or more unaffiliated tenants;

• The operating company is a guarantor or co-borrower on the SSBCI-supported loan or 

investment to the eligible passive company;

• Both the eligible passive company and the operating company must execute the borrower use 

of proceeds certification and sex offender certifications covering all principals, as co-borrower or 

guarantor;

• Each natural person holding an ownership interest constituting at least 20 percent of either the 

eligible passive company or the operating company provides a personal guarantee for the 

SSBCI-supported loan or investment; and,

• The eligible passive company and the operating company have a written lease with a term at 

least equal to the term of the SSBCI-supported loan or investment, including options to renew 

exercisable solely by the operating company.

It is the responsibility of the Participating State to ensure that all of the above requirements are 

met. SSBCI-supported loans or investments that do not provide documentary substantiation to all of 

the requirements related to the eligible passive company exception to the passive real estate 

investment prohibition on use of proceeds will be determined ineligible.

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7. How can participating states, territories and municipalities comply with Section 4.4 of the 

Allocation Agreement regarding restrictions on the use of allocated funds with respect to prohibited 

loan purposes? 

Section 4.4(e) of the Allocation Agreement specifies, "The participating state, territory or municipality 

shall not use any allocated funds for loans used to finance, in whole or in part, business activities 

prohibited by the SSBCI Policy Guidelines, Treasury regulations, including Treasury regulations 

promulgated after the date of this Allocation Agreement." As such, the SSBCI Policy Guidelines are the 

controlling document.

Treasury has created sample self-certifications that a participating state, territory or municipality may 

use in order to obtain certifications from the financial institution lenders and the small business 

borrowers. These certifications are not intended to replace or supersede any internal controls the 

participating state, territory, or municipality has in place. Rather, these certifications are provided for 

illustrative purposes and are available for use by the participating state, territory, or municipality 

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according to their discretion. These sample certifications are attached as Annex 1 and 2 to this 

document.

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8. May SBA-guaranteed loans or other federally guaranteed or insured loans be enrolled in approved 

state programs receiving SSBCI funds? 

No. The SSBCI Policy Guidelines prohibit enrolling the unguaranteed portion of SBA- guaranteed loans in 

either a CAP or OCSP. This prohibition also applies to the unguaranteed portion of other federally 

guaranteed loans.

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9. How do participating states, territories and municipalities comply with the Sex Offender 

certifications in Section 4.9 of the Allocation Agreement? 

Section 4.9 of the Allocation Agreement specifies that "[Participating states, territories and 

municipalities must obtain]...(c) a certification from the private entity, including any financial institution, 

that the Principals of such entity have not been convicted of a sex offense against a minor (as such terms 

are defined in section 111 of the Sex Offender Registration and Notification Act (42 U.S.C. 16911))."

Meaning of "private entity": Section 4.9(c) of the Allocation Agreement requires that both the financial 

institution lender and each borrowing entity certify to the participating state, territory or municipality 

that none of the Principals have been convicted to referenced sex offense.

Meaning of "Principals": For the limited purposes of Section 4.9 of the Allocation Agreement, Principal is 

defined as, " if a sole proprietorship, the proprietor; if a partnership, each managing partner and each 

partner who is a natural person and holds a 20% or more ownership interest in the partnership; and if a 

corporation, limited liability company, association or a development company, each director, each of 

the five most highly compensated executives or officers of the entity, and each natural person who is a 

direct or indirect holder of 20% or more of the ownership stock or stock equivalent of the entity."

Treasury has created sample self-certifications that a participating state, territory or municipality may 

use in order to obtain certifications from the financial institution lenders and the small business 

borrowers. These certifications are not intended to replace or supersede any internal controls the 

participating state, territory, or municipality has in place. Rather, these certifications are provided for 

illustrative purposes and are available for use by the participating state, territory, or municipality 

according to their discretion. These sample certifications are attached as Annex 3 to this document.

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10. What restrictions and reporting requirements apply to use of SSBCI funds after the termination of 

the Allocation Agreement on March 31, 2017? Updated April 21, 2016. 

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The authorities and duties of Treasury to implement and administer the Program terminate on 

September 27, 2017. Further, Treasury expects that the expiration date of all Allocation Agreements will 

be March 31, 2017. Between January 1, 2017, and March 31, 2017, each participating state, territory or 

municipality must submit (1) its final annual report, (2) its final Federal Financial Report (SF-425), and (3) 

a summary of the performance results of the allocation, including a narrative of how or the extent to 

which the purpose of the allocation was accomplished using allocated funds.

In addition, each participating state, territory, or municipality must submit its final quarterly report by 

January 31, 2017. Participating states, territories, and municipalities will not, under any circumstances, 

be released from these reporting requirements early, even if a participating state, territory, municipality 

draws down or uses allocated funds prior to the expiration of the allocation time period.

Although the reporting requirements in Sections 4.7 and 4.8 of the Allocation Agreement terminate 

when the Allocation Agreement expires, the restrictions set forth in the Act, the Policy Guidelines, 

National Standards and SSBCI’s Frequently Asked Questions will remain in effect and govern the original 

use of funds disbursed by the SSBCI program (see definition of “SSBCI funds used” in SSBCI Guidelines, 

Section VII).

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11. Will I be required to calculate my private leverage ratio for each annual report? 

No. Treasury intends to automatically calculate each participating state's, territory's, or municipality's 

annual and cumulative private leverage ratio from the data provided by each participant's required 

Annual Report, as detailed in section 4.8 of the Allocation Agreement.

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12. How much capital must participating lenders or investors have at risk under a CAP or OCSP? 

Updated November 27, 2013 to reflect SSBCI’s policy on calculating the private leverage ratio 

expectation over five years for modifications. 

Financial institution lenders or other private investors must have at least 20% of their own capital at risk 

in any approved CAP or OCSP, in order to fulfill the requirement of the Act to have a "meaningful 

amount of their own capital at risk". This means that in the case of default of a loan or investment made 

to an eligible small business under an approved SSBCI program, a private lender or investor will be at 

risk for at least 20% of such loss. In the case of an OCSP venture capital or angel investment network, 

this capital-at-risk requirement applies at the level of the fund that makes the investment in eligible 

small businesses, not at the "fund of funds" level. For Allocation Agreement modifications, Participating 

States may calculate the private leverage ratio expectation of their proposed Approved State Programs 

over a maximum five-year time period from Treasury’s approval of the proposed modification. Please 

also see SSBCI’s revised Modification Procedures, revised November 22, 2013.

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13. Are there prohibitions on combining a transaction supported with SSBCI funds with a loan 

guaranteed under the U.S. Small Business Administration (SBA) 7(a) or 504 loan programs or the U.S. 

Department of Agriculture (USDA) Business & Industrial (B&I) loan program? 

Posted December 17, 2013. Effective February 17, 2014.

Yes. If a borrower receives a loan guaranteed by the SBA’s 7(a) or 504 loan programs or the USDA’s B&I 

loan program, SSBCI funds may not be used as credit support to a loan or investment for the same 

purpose as the SBA- or USDA-guaranteed loan. For example, a borrower may not use a loan guaranteed 

under SBA’s 7(a) program and an SSBCI-supported loan to purchase the same real estate, including land 

and improvements. In contrast, a borrower may receive two sources of Federal support in two separate 

loans if the proceeds for the two loans are for different purposes. For example, if a borrower receives a 

loan guaranteed under the SBA 7(a) or 504 programs or the USDA B&I program to purchase real estate 

occupied by the borrower, the borrower also may receive an SSBCI-supported loan to purchase 

equipment. 

Participating States should maintain documentation showing that the borrower used the loan proceeds 

from the two loans for different purposes. Examples of documentation include the description of the 

loan purpose in the two loan agreements or promissory notes, copies of checks from the lender payable 

to different vendors from the proceeds from the two loans or investments, or a statement signed by the 

lender/investor or borrower/investee prior to closing the SSBCI-supported transaction indicating the 

two different uses of the two loans or investments.

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14. Are there prohibitions on enrolling the same loan or investment in more than one Approved State 

Program or using more than one Approved State Program to support multiple loans or investments 

for the same loan purpose? Posted December 17, 2013. Effective February 17, 2014.

Yes. One loan cannot be enrolled in more than one Approved State Program at the same time. In 

addition, a lender may not divide one loan into multiple agreements or notes, each enrolled in an 

Approved State Program, for the same loan purpose. 

If, for example, a borrower receives two loans under separate Approved State Programs, the 

Participating State should maintain documentation showing that the borrower used the loan proceeds 

from the two loans for different purposes. Examples of documentation include the description of the 

loan purpose in the two loan agreements or promissory notes, copies of checks from the lender payable 

to different vendors from the proceeds from the two loans or investments, or a statement signed by the 

lender/investor or borrower/investee prior to closing the SSBCI-supported transaction indicating the 

two different uses of the two loans or investments. 

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15. Are there prohibitions on using SSBCI funds in combination with a transaction that generated tax 

credits, including a New Markets Tax Credit (NMTC) or Historic Preservation Tax Credit transaction? 

Posted December 17, 2013. Effective February 17, 2014.

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Yes. An SSBCI-supported transaction cannot be used to increase the pool of funds that generates tax 

credits. An SSBCI-supported transaction can only be used outside the structure designed to leverage tax 

credits. For example, assume SSBCI funds support a loan to a community development entity (CDE). 

The CDE cannot then use the SSBCI-supported loan to make a qualified low community investment that 

generates tax credits for purposes of a NMTC transaction. If a given transaction supported with SSBCI 

funds meets program requirements, SSBCI funds may be used alongside a transaction that generates tax 

credits. 

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16. How does the $20 million restriction on credit support under OCSPs apply in general and when 

SSBCI may be providing support to one or more transactions within a larger financing?

Posted January 23, 2014. 

In accordance with section 3006(c)(4)(C) and (D) of the Small Business Jobs Act and section II of the 

SSBCI Policy Guidelines, an OCSP must target loans or investments with an average principal amount of 

$5 million or less and cannot provide credit or investment support if a given transaction exceeds $20 

million. For approved State lending programs, the $20 million restriction applies to the principal amount 

of the loan directly supported by or funded with SSBCI funds, plus all other loans for the same loan 

purpose that close on or about the same date. Direct SSBCI support for a loan includes a guarantee, 

cash collateral, and loan participation (either purchased participation or companion participation 

loan). For equity investment programs, the $20 million restriction applies to a single investment round 

that includes an SSBCI-funded investment, including all classes of equity instruments that close on or 

about the same date. SSBCI support for an investment includes direct equity investments in small 

businesses made by a State or its contractors, as well as investments in small businesses made by 

privately managed funds in which the State invested SSBCI funds (“fund of funds” investments). The $20 

million restriction cannot be avoided by dividing a larger loan into smaller loans or by creating separate 

equity instruments within an investment round. 

In addition, Participating States should be wary about participating in transactions that involve multiple 

loans or investments to affiliated entities that should be structured as a single loan or investment. One 

indicator that multiple loans or investments to affiliated entities should constitute a single transaction is 

common ownership and control between the entities, regardless of whether the owner’s or owners’ 

ownership percentages vary between the affiliated entities. Other indicators include 

cross-collateralization and substantially the same terms between the transactions. The examples and 

indicators are not exhaustive, and Participating States should use their judgment in assessing whether 

transactions exceed the $20 million restriction. 

Treasury recognizes that each transaction is fact-specific and reminds the Participating State to assess 

each transaction carefully and to document the justification for participating in any transaction that 

could reasonably be viewed as exceeding the $20 million restriction. 

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17. Can a participating State cure a noncompliant use of SSBI funds? Effective September 25, 2014.

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A Participating State may wish to un-enroll a particular transaction or use of administrative expenses 

from its SSBCI program account: (1) when the Participating State itself or SSBCI identifies a potentially 

noncompliant use of funds; or (2) when the Office of the Inspector General (OIG) identifies an instance of 

noncompliance or misuse not characterized as reckless or intentional.

2

For situation (1), SSBCI will perform an analysis to determine whether the state’s use of funds in question 

is noncompliant. SSBCI staff will consider the nature of the use of funds and the extent to which it was in 

accordance with the Small Business Jobs Act and with established policy guidance, including the SSBCI

Policy Guidelines, the SSBCI Allocation Agreement, and the National Standards for Compliance and 

Oversight. Additional sources could include applicable frequently asked questions (FAQs) published by 

SSBCI, guidance distributed at a conference or on a conference call, and any other written guidance

provided by Treasury to the Participating State, including via email. If SSBCI determines the instance of 

noncompliance constitutes potential misuse that may meet the level of “reckless” or “intentional”, SSBCI 

will refer the case to the OIG to perform an audit. If the OIG finds that the misuse is reckless or 

intentional, it will issue a formal recommendation to SSBCI, recommending that the funds be recouped, 

as required by Section 3003(c)(1)(C)(ii) of the Small Business Jobs Act. For situation (2), the OIG already 

has conducted a misuse analysis, and SSBCI need not conduct one. 

For both situations (1) and (2), the Participating State will be afforded an opportunity to provide SSBCI or 

the OIG additional information that will be used to determine whether a general event of default under

the Allocation Agreement has occurred. The Participating State will be given 30 calendar days to supply

information for SSBCI’s analysis that was not considered at the time the instance of noncompliance or 

misuse was identified. In the case of disallowed or impermissible administrative expenses, the 

Participating State will be given 30 calendar days to demonstrate that the administrative expenses satisfy

program requirements. If an instance of potential misuse is referred to the OIG for an audit, the OIG will 

determine the response time for its data requests.

Treasury may also allow a Participating State to replenish its SSBCI program account in the amount of 

funds found to be noncompliant or misused. If Treasury approves a proposed replenishment,

Treasury will allow the Participating State to un-enroll the loan or investment or remove the 

disallowed administrative expenses from the SSBCI account once sufficient documentation is received 

and reviewed by SSBCI Compliance staff. Treasury recognizes that some Participating States may not 

have funds available to replenish the SSBCI program account, in which case Treasury may exercise 

other remedies, including reducing the amount of future disbursements. 

Written approval is needed for replenishment and un-enrollment. Documentation requirements and 

an example certification to request Treasury’s approval are provided below. Please note that 

Treasury’s approval of any replenishment and un-enrollment does not preclude the OIG from 

conducting its own review of non-compliance issues to determine misuse. If the OIG determines there 

has been reckless or intentional misuse, recoupment in the amount of such misused funds is required 

 

2 SSBCI recognizes that Participating States may wish to un-enroll instances of misuse found by the OIG to be

reckless or intentional. SSBCI will consider such requests on a case-by-case basis; however, the OIG’s findings and 

determinations remain in place. If the OIG finds that the misuse is reckless or intentional, SSBCI will recoup the 

funds, as required by Section 3003(c)(1)(C)(ii) of the Small Business Jobs Act. 

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under the statute regardless of whether the Participating State has replenished the SSBCI program 

account. 

Treasury may determine that the opportunity to rebut or cure is not appropriate if a Participating 

State’s noncompliance meets any of the following criteria: (a) it was not self-reported; (b) it was

widespread; or (c) it occurred after relevant guidance was provided. If any of these criteria is present,

Treasury may recommend a determination of a general event of default.

If an instance of noncompliance cannot be cured in a manner satisfactory to Treasury, Treasury may

issue a written notice of a general event of default to the Participating State, pursuant to Section 6.1 of 

the SSBCI Allocation Agreement. The written notice will give the Participating State 10 calendar days 

from the date of the notice to respond, in accordance with Section 6.6 of the SSBCI Allocation 

Agreement, and inform the Participating State that it may include any mitigating facts or 

circumstances, with accompanying documentation, in the response.

Process for Requesting Treasury’s Approval to Replenish and Un-enroll

Documentation for the Replenishment of Loans and Investments

A Participating State must provide Treasury with a written description of each transaction and the 

justification for the proposed replenishment and un-enrollment. If Treasury determines the request is

justified, Treasury will provide the Participating State with written conditional approval. Once the 

Participating State has replenished the SSBCI Program Account, the Participating State must provide 

the following:

1. A letter from the Participating State to the lender, investor, or third party involved in 

administration that informs the lender that the transaction is no longer enrolled in the SSBCI program, 

and that SSBCI funds no longer support the transaction. For certain transactions, as determined by 

Treasury, the Participating State must provide evidence that the relevant contract is no longer valid or 

will not be honored using SSBCI funds. 

2. Accounting documentation evidencing that the Approved State Program account has been 

replenished.

3. A certification from the Authorized State Official that explains the reason for un-enrollment of each 

transaction and that the Participating State has undertaken all necessary actions and transactions, in 

accord with Participating State laws and requirements, to replenish the Approved State Program 

account.

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Documentation for the Replenishment of Administrative Expenses 

A Participating State must provide Treasury with written description of the administrative expenses and 

the justification for the proposed replenishment and un-enrollment. If Treasury determines that the 

request is justified, Treasury will provide the Participating State with written conditional approval. Once

the Participating State has replenished the administrative expenses, the Participating State must provide 

the following: 

1. Accounting documentation evidencing that the SSBCI program account has been replenished.

2. A certification from the Authorized State Official that explains the reason for the un-enrollment of 

the administrative expenses and that the Participating State has undertaken all necessary actions and 

transactions, in accord with Participating State laws and requirements, to replenish the SSBCI program

account.

Treasury’s Approval to Un-Enroll Loans, Investments, and Administrative Expenses

Treasury will review the documentation submitted following replenishment and, if Treasury determines 

that it is sufficient, will provide the Participating State with written approval to un-enroll the relevant 

transactions or administrative expenses.

Example Authorized State Official’s Certification for Seeking Treasury’s Approval for Un-Enrollment and

Replenishment

Reference is made to the State Small Business Credit Initiative (SSBCI) Allocation Agreement dated as of [ 

] (Allocation Agreement), between the United States Department of the Treasury (Treasury) and 

[the Participating State].

I, the undersigned as the Authorized State Official of [the Participating State], hereby certify that as of 

the date of this certification, [the Participating State] requests un-enrollment of the following 

transactions and/or administrative expenses from the Participating State’s SSBCI account: 

[Insert list of transactions and/or administrative expenses to be un-enrolled] 

The reasons for the un-enrollment are [specify for each transaction and/or administrative expense 

to be un-enrolled]. 

I further certify that the [the Participating State] has undertaken and completed all necessary actions 

and transactions, in accord with [the Participating State] laws and requirements, to deposit [$ ] of 

non-SSBCI funds into [the Program identified under Annex 1 of the Allocation Agreement] OR [the 

account containing SSBCI funds allocated for Administrative Funds under Annex 3 of the Allocation 

Agreement]. The deposited funds will be used in accordance with the terms and conditions of the 

Allocation Agreement. 

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18. May SSBCI funds support a loan or investment to a religious establishment?

Yes, a religious establishment may receive SSBCI funds provided that the proceeds of the loan or 

investment are used only for a “business purpose.” A “business purpose” does not include an explicitly 

religious purpose. SSBCI funds may not support a loan or investment used by the religious 

establishment for the purposes of directly supporting, assisting, or furthering an explicitly religious 

purpose, including, but not limited to, worship, religious instruction, or proselytization. 

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19. How should a state trace SSBCI funds that are allocated to a privately managed venture capital 

fund (VC fund) into an eligible business? 

When a state allocates SSBCI funds to a VC fund, and the VC fund then combines (commingles) the SSBCI 

funds with private capital in a single account, it becomes important for the state to be able to trace the 

amount of SSBCI funds expended to each small business to confirm that SSBCI program rules and 

guidelines regarding private capital are being followed. There are a variety of ways to do this (the below 

list is not exhaustive):

• A VC fund may designate a subset of its overall portfolio as its “SSBCI portfolio.” For example, 

the SSBCI portfolio could consist of the investments closed after the state has allocated SSBCI 

funds to the VC fund. The SSBCI portfolio investments must comply with all program rules. 

• A VC fund may invest SSBCI funds pro rata in all of its investments, i.e., proportionately with 

funds obtained from other limited partners. All investments must comply with all program 

rules.

• A VC fund may allocate a larger portion of SSBCI funds to certain investments. All investments 

must comply with all program rules.

In their written records, states should be explicit about the overall allocation method used and should 

record the exact amount of SSBCI funds invested in each small business investment at the time the 

investment is made. The state should also record the amount of any VC fund management fees charged 

to its SSBCI allocation. VC fund management fees charged to SSBCI funds are considered administrative 

expenses and are subject to program rules (please refer to FAQ on Program Income and Administrative 

Expense).

Additionally, private lenders or investors must bear 20 percent or more of the risk of loss in any 

transaction that uses SSBCI funds. If a VC fund is using SSBCI funds as part of staged funding of a single 

investment, when SSBCI funds are invested, 20 percent of the capital-at-risk must be from private 

sources.

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20. When can private capital be counted towards a state’s private leverage ratio?

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Private capital invested in a small business must have been the “cause and result” of the SSBCI 

investment in the VC fund to be included in the transaction-level private leverage ratio. 

Generally, small business investments closed by the VC fund manager before the state’s SSBCI funds 

were received by the VC fund should not be included in the SSBCI portfolio. A pre-SSBCI-closing private 

capital investment may be counted towards the state’s private leverage ratio in special circumstances 

when a state can demonstrate through documentation that the private capital investment was the 

“cause and result” of the forthcoming SSBCI funds. For example, SSBCI has previously allowed a preSSBCI-closing private capital investment to count towards the state’s private capital ratio when the state 

supplied board minutes evidencing the causal connection. 

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21. What is the deadline for modification requests?

A Participating State may submit modification requests for the addition of new Approved State 

Programs until September 30, 2015. A Participating State may submit all other modification requests 

until June 30, 2016

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22. What is the deadline for disbursement requests? 

A Participating State may submit disbursement requests until September 30, 2016.

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23. How will Treasury determine whether to terminate the availability of un-transferred Allocated 

Funds for Participating States that have not applied for their second disbursement by June 30, 2015?

If a Participating State has not qualified for its second disbursement by June 30, 2015, Treasury will 

terminate the availability of un-transferred Allocated Funds if the Participating State has not expended, 

obligated or transferred any of its Allocated Funds during the six months preceding June 30, 2015.

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24. How will SSBCI program rules change in 2017? Updated April 21, 2016

In general, all SSBCI funds used (as defined in Section VII of the Policy Guidelines) for the first time must 

be used in accordance with the program rules set forth in the Act, the Policy Guidelines, the National 

Standards, and SSBCI's Frequently Asked Questions. Program rules regarding the use of funds do not 

apply to the recycling of SSBCI funds after March 31, 2017.

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After March 31, 2017, SSBCI funds being used for the first time must continue to be used in accordance 

with certain sections of Article IV of the Allocation Agreement. These include:

• Section 4.1 – Compliance with Government Requirements 

• Section 4.2 – Authorized Uses of Allocated Funds/Allowable Costs 

• Sections 4.4 – Restrictions on the Use of Allocated Funds and Program Income 

• Section 4.6(b) – Internal Control and Financial Management System Requirements 

• Sections 4.9 – Access to Records of and Certifications from Financial Institutions

After March 31, 2017, States will no longer be required to submit the following documents to Treasury: 

• Quarterly Reports (as required by Section 4.7 of the Allocation Agreement) 

• Annual Reports including SF-425 Federal Financial Reports (as required by Section 4.8 of the 

Allocation Agreement) 

• Notices of Certain Material Events (as required by Section 4.10) 

After March 31, 2017, States must continue to require financial institutions and other private entities to 

make SSBCI-related records available to the Treasury Inspector General, and States must retain their 

own SSBCI-related records for three years following the submission of their final Quarterly Reports. 

On September 27, 2017, Treasury’s authority to administer SSBCI expires. As a result, the following FAQs 

will no longer be in effect: 

• Post-Application/Review Related Questions FAQ #5 Notification of Change 

• Program Income and Administrative Expense Questions FAQs #2 Use of Program Income and #3 

Administrative Expenses 

• Post-Award/Compliance Questions FAQ #17 Curing Noncompliant Use 

• Municipalities FAQ #9 Border restrictions

Further, after September 27, 2017, States cannot engage in activities that require Treasury’s approval. 

These activities include enrolling any portion of an SBA-guaranteed loan and issuing Subgrants using 

Allocated Funds. However, States will retain the option to cure a noncompliant use (similar to FAQ 17) 

so long as they document the replenishment and ensure the proper parties have been notified of the 

release of SSBCI obligations.

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Municipalities

1. What is a municipality for purposes of the SSBCI?

For the purposes of administering the SSBCI program, Treasury defines a "municipality" as any 

incorporated city, town, borough, village, or township; or a federally-recognized Indian tribe.

"Indian tribe" means an Indian or Alaska Native tribe, band, nation, pueblo, village, or 

community that the Secretary of the Interior acknowledges to exist as an Indian tribe pursuant 

to the Federally Recognized Indian Tribe List Act of 1994, 25 U.S.C. 479a.

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2. How can my municipality receive special permission from the Secretary to apply for SSBCI 

funds?

Municipalities in Wyoming and North Dakota currently have permission to apply for SSBCI funds 

because those two States did not file a notice of intent by November 27, 2010, as required in 

order for a State to be eligible for SSBCI funding. By July 8, 2011, Treasury will post a notice on 

SSBCI's website listing those States that had filed a notice of intent by November 27 but did not 

file a complete application by June 27, 2011, so that municipalities in those States will have the 

earliest possible notice that they may consider whether to apply directly. In August, Treasury 

will post a notice on SSBCI's website listing additional States in which municipalities have 

permission to apply for SSBCI assistance.

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3. If my municipality has permission to apply for SSBCI funding, what must I do in order for my 

municipality to be considered?

In order to be considered for funding, eligible municipalities must file an application meeting 

both of the following requirements no later than 5 p.m. Eastern Daylight Time on September 27, 

2011:

1. The application is from an eligible applicant (i.e. a municipal department or agency 

expressly designated by the municipality's chief executive to implement the program 

pursuant to the designation letter attached to question 1B in the application) that can 

bind the municipality to obligations with the federal government as well as have the 

legal mechanisms in place to accept the transfer of SSBCI funds; and

2. The application contains a substantive response to all required fields and narratives. A 

substantive response is one which reflects a good faith effort to answer the question.

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4. Is my municipality required to file a notice of intent to apply?

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Treasury encourages eligible municipalities to file by August 15, 2011, a notice of intent to apply. 

This will enable Treasury to offer technical assistance to those municipalities that have indicated 

their intent to apply.

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5. If my municipality satisfies the eligibility criteria and submits a completed application by the 

established deadline, will we automatically receive funding?

No. Section 3004(d)(5) of the Act states that if more than three municipalities, or a combination 

of municipalities, of a State apply for approval, and meet the applicable approval criteria, the 

Secretary shall allocate funds to the 3 municipalities (or combinations of municipalities) with the 

largest populations. In addition, Section 3004(d)(7) of the Act requires the Secretary to also 

consider the additional eligibility considerations set forth in Section 3006(d) of the Act, which 

include the anticipated benefits to the State, its residents, and its businesses; operational 

capacity; management skill and experience; internal controls; and program design.

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6. How much should my municipality apply for?

Eligible municipalities should request the amount of SSBCI funds they believe their proposed 

programs can use for program purposes through December 31, 2016, but not to exceed the 

amount of the SSBCI allocation for your State as a whole (for the amount of each State's 

allocation, please refer to the SSBCI website at http://www.treasury.gov/ssbci). This amount 

should be consistent with the applicant's narrative attachments to Section 3D and 4E of the 

application, which require detailed forecasts regarding the projected number of loans and loan 

amounts through December 31, 2016. If these narratives are not consistent with the amount 

requested, the applicant will be asked to file a revised application.

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7. If my municipality is approved for funding, what will the size of our allocation be?

The size of your municipality's allocation is dependent upon several factors. First, the amount 

requested in the application, as supported by the narrative attachments to Sections 3D and 4E, 

provide the ceiling for the amount of SSBCI funds that may be transferred to the eligible 

municipality upon approval and execution of the SSBCI Allocation Agreement. For instance, if 

the total amounts requested by the municipalities selected for funding in a given State exceed 

that State's total allocation, or if more than three municipalities or combinations of 

municipalities apply, then Treasury will apportion the State's allocation among approved 

municipalities in amounts proportionate to the population of those municipalities (or 

combinations of municipalities) approved for SSBCI funding, in accordance with Section 

3004(d)(6) of the Act. Treasury will use population data from the most recent decennial census 

when making these calculations.

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8. Are there any additional requirements for applications from combinations of municipalities?

All of the SSBCI application requirements that apply to States also apply to municipalities and 

municipalities submitting joint applications. Eligible municipalities or other municipal entities 

applying in a joint application for SSBCI funds are required to submit a signed SF-424B and a 

completed application signature page from each municipality or municipal entity in the 

combination application. The chief executive of each municipality or municipal entity that is a 

party to the joint application must submit a letter of designation. These letters of designation 

must contain the names of all municipalities that are party to the joint application and which 

municipality (as defined by SSBCI) is the "lead applicant." The "lead applicant" will serve as the 

point of contact for all matters involving the application and that will be responsible for ensuring 

that all parties to the joint application comply with program requirements. The "lead applicant" 

will be responsible for compiling and submitting the quarterly reports, annual reports, and 

Form SF-425 (Federal Financial Report), and for responding to any requests for information from 

Treasury staff.

In addition, as a condition of closing, the municipalities in a joint application will submit for 

Treasury review a cooperative agreement outlining their internal allocation of funds and their 

respective roles and responsibilities. This cooperative agreement is a private contract among the 

municipalities involved. Treasury will therefore not be responsible for approving or enforcing 

this private contract; however, Treasury will review the cooperative agreement for sufficiency as 

a condition of closing.

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9. May Participating Municipalities use SSBCI funds to support loans or investments to eligible 

small businesses that are located outside the geographic borders of the Participating 

Municipality?

Yes, provided that the mayor or chief executive of a Participating Municipality warrants, in 

writing, that the loan or investment will result in significant economic benefit to the 

Participating Municipality. When evaluating criteria to determine if a loan or investment made 

outside of its geographic borders yields significant economic benefit, Participating Municipalities 

should consider the impacts that the transaction will have on a) jobs created or maintained 

within the Participating municipality; b) increasing the amount of sales, income, or other tax 

revenue to the Participating Municipality; or c) the benefit of the goods or services provided by 

the small business to the Participating Municipality or businesses within the Participating 

Municipality.

These examples are illustrative of significant economic benefit, but not exhaustive. Participating 

Municipalities may work with their SSBCI Relationship Manager to seek advice on other ways to 

substantiate the significant economic benefit that may result from a loan or investment of this 

type.

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A written warranty of the anticipated economic benefit, signed by the mayor or chief executive 

of the Participating Municipality, must be retained with the transactions records for each loan or 

investment made outside of the borders of a Participating Municipality and must be made 

available to Treasury upon request, pursuant to Sections 4.13 and 4.14 of the Allocation 

Agreement.

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Appendix 1

 

Treasury has created this sample self-certification that a participating state, territory or municipality 

may use in order to obtain certification from small business borrowers or investees. This certification is 

not intended to replace or supersede any internal controls the participating state, territory, or 

municipality has in place. Rather, this certification is provided for illustrative purposes and is available 

for use by the participating state, territory, or municipality according to their discretion

Sample Small Business Borrower/Investee Certification for Use of Proceeds

These assurances reference Section 3005(e)(7) and Section 3011(c)(2) of the Small Business Jobs Act of 

2010. 

Legal name of borrower or investee: 

________________________________________________________

The borrower or investee hereby certifies the following to the lender or investor: 

1. The loan or investment proceeds will be used for a "business purpose." Business purpose 

includes, but is not limited to, start up costs, working capital, business procurement, franchise 

fees, equipment, inventory, as well as the purchase, construction renovation or tenant 

improvements of an eligible place of business that is not for passive real estate investment 

purposes. The definition of business purpose excludes: activities that relate to acquiring or 

holding passive investments, such as commercial real estate ownership and the purchase of 

securities; and lobbying activities, as defined in Section 3(7) of the Lobbying Disclosure Act of 

1995, P.L. 104-65, as amended.

2. The loan or investment proceeds will not be used to:

1. repay a delinquent federal or state income taxes unless the Borrower has a payment 

plan in place with the relevant taxing authority; or

2. repay taxes held in trust or escrow, e.g. payroll or sales taxes; or

3. reimburse funds owed to any owner, including any equity injection or injection of capital 

for the business' continuance; or

4. to purchase any portion of the ownership interest of any owner of the business.

3. The borrower or investee is not:

1. an executive officer, director, or principal shareholder of the lender; or

2. a member of the immediate family of an executive officer, director, or principal 

shareholder of the lenders; or

3. a related interest of an such executive officer, director, principal shareholder, or 

member of the immediate family.

For the purposes of these three restrictions, the terms "executive officer", "director", "principal 

shareholder", "immediate family", and "related interest" refer to the same relationship to a lender as 

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the relationship described in part 215 of title 12 of the Code of Federal Regulations, or any successor to 

such part.

1. The borrower or investee is not:

1. a business engaged in speculative activities that develop profits from fluctuations in 

price rather than through normal course of trade, such as wildcatting for oil and dealing 

in commodities futures, unless those activities are incidental to the regular activities of 

the business and part of a legitimate risk management strategy to guard against price 

fluctuations related to the regular activities of the business; or

1. a business that earns more than half of its annual net revenue from lending 

activities; unless the business is a non-bank or non-bank holding company 

Community Development Financial Institutions; or

2. a business engaged in pyramid sales, where a participant's primary incentive is 

based on the sales made by an ever-increasing number of participants; or

3. a business engaged in activities that are prohibited by federal law or applicable 

law in the jurisdiction where the business is located or conducted. (Included in 

these activities is the production, servicing, or distribution of otherwise legal 

products that are to be used in connection with an illegal activity, such as selling 

drug paraphernalia or operating a motel that knowingly permits illegal 

prostitution); or

4. a business engaged in gambling enterprises, unless the business earns less than 

33% of its annual net revenue from lottery sales.

Legal Name:

 

By: 

Authorized Signatory

Name: 

Title: 

Date: 

 

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Appendix 2

Treasury has created this sample self-certification that a participating state, territory or municipality 

may use in order to obtain certification from lenders or investors. This certification is not intended to 

replace or supersede any internal controls the participating state, territory, or municipality has in 

place. Rather, this certifications is provided for illustrative purposes and is available for use by the 

participating state, territory, or municipality according to their discretion. 

Example Lender/Investor Certification for Use of Proceeds 

This Assurance is referenced by Section 3005(e)(7) of the Small Business Jobs Act of 2010.

Legal name of lender or investor: 

___________________________________________________________________

The Lender/Investor hereby certifies to the Participating State the following: 

1. The loan or investment has not been made in order to place under the protection of the 

approved state program prior debt that is not covered under the approved state program and 

that is or was owed by the borrower to the lender or to an affiliate of the lender. 

2. The loan or investment is not a refinancing of a loan or investment previously made to that 

borrower by the lender or an affiliate of the lender.

3. The lender is not attempting to enroll the unguaranteed portions of SBA-guaranteed loans.

4. [For investment under SSBCI Venture Capital Programs] The investment complies with the 

conflict of interest rules set forth in the National Standards for Compliance and Oversight.

Legal Name:

 

By: 

Authorized Signatory

Name: 

Title: 

Date: 

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This Appendix 2 is effective on July 1, 2014.

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Appendix 3

Treasury has created this sample self-certification that a participating state, territory or municipality 

may use in order to obtain certification from lenders, investors, and small business borrowers or 

investees. This certification is not intended to replace or supersede any internal controls the 

participating state, territory, or municipality has in place. Rather, this certification is provided for 

illustrative purposes and is available for use by the participating state, territory, or municipality 

according to their discretion. 

Example Sex Offender Certification 

(May be Used for Both Borrowers/Investees and Lenders/Investors)

This certification is required by Section 3011(c)(2) of the Small Business Jobs Act of 2010 from any 

private entity that receives a loan, a loan guarantee, or other financial assistance using funds received 

by a participating State under the State Small Business Credit Initiative. 

Legal name of entity: 

___________________________________________________________________

As required by Section 3011(c)(2) of the Small Business Jobs Act of 2010, the private entity hereby 

certifies to the participating State that the Principals of the private entity have not been convicted of a 

sex offense against a minor (as such terms are defined in section 111 of the Sex Offender Registration 

and Notification Act (42 U.S.C. 16911)). For the purposes of this Certification, Principal means the 

following: if a sole proprietorship, the proprietor; if a partnership, each managing partner and each 

partner who is a natural person and holds a 20% or more ownership interest in the partnership; and if a 

corporation, limited liability company, association or a development company, each director, each of 

the five most highly compensated executives or officers of the entity, and each natural person who is a 

direct or indirect holder of 20% or more of the ownership stock or stock equivalent of the entity.

Legal Name:

 

By: 

Authorized Signatory

Name: 

Title: 

Date: 

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