January 2014
 DEPARTMENT OF THE TREASURY WASHINGTON, D.C. 20220

January 21, 2014

Dear Colleagues:

On September 27, 2010, President Obama signed into law the Small Business Jobs Act of 2010 (the Act), 

which created the State Small Business Credit Initiative (SSBCI). The Act provided almost $1.5 billion 

for state programs that support access to credit for small businesses and small manufacturers. SSBCI is 

expected to spur up to $15 billion in new private capital by requiring states to demonstrate a reasonable 

expectation that they will leverage $10 in private lending for every $1 in SSBCI funds.

The Act also called on Treasury “to provide technical assistance to States for starting such programs and 

generally disseminate best practices.” Treasury requested the enclosed report— Filling the Small 

Business Lending Gap: Lessons from the U.S. Treasury’s State Small Business Credit Initiative Loan 

Programs—from outside experts for their perspective on the lessons learned from the loan programs. The 

report is addressed to state policymakers and state program managers. The report covers three areas: 

• The context for SSBCI, including the existing federal programs to support small business lending;

• The distribution of SSBCI loan programs by the type of program, the type of implementing 

agency, and the type of lender;

• The consultants’ perspective on the lessons learned and recommendations that could further 

improve the program’s performance.

In addition to reports like this one from industry experts, Treasury also publishes:

• Program Profiles: descriptions of the features of the SSBCI loan and equity products;

• Best Practices from Participating States: peer-to-peer advice on starting and managing SSBCI 

programs;

• Summaries of States’ Annual Reports and Quarterly Reports: statistics and analysis of the states’ 

use of SSBCI funds.

We hope that this report and the other materials available at www.treasury.gov/ssbci will foster greater 

understanding of state loan programs and their potential to create a more vibrant small business financing 

market. 

Best regards,

Don Graves, Jr. Clifton G. Kellogg

Deputy Assistant Secretary Director

Small Business, Community Development State Small Business Credit Initiative

and Affordable Housing Policy
Filling the Small Business Lending Gap 

Filling the Small Business Lending Gap: 

Lessons from the U.S. Treasury’s SSBCI Loan Programs

Contents

Executive Summary .............................................................................................i

Section 1: Setting the Context for SSBCI..............................................................1

A. Introduction and Project Background...............................................................................................1

B. Promoting Small Business Finance in the Wake of the Economic Crisis...........................................3

Section 2: SSBCI Product and Portfolio Analysis .................................................8

A. SSBCI Loan Products..........................................................................................................................8

B. How SSBCI Assists Small Businesses ...............................................................................................15

C. Environment in State Government for Loan Programs..................................................................21

Section 3: Lessons Learned and Recommendations..........................................29

A. Lessons Learned..............................................................................................................................29

B. Recommendations for State Policymakers and Program Managers..............................................38

Appendix: Advantages and Disadvantages of Three Organizational Structures 44

References........................................................................................................46

Cover Photos:

1. In North Carolina, Healing with CAARE received funding to expand temporary housing for 

veterans in Durham County.

2. In Michigan, New Center Stamping received funding for a new line of machinery in inner city

Detroit.

3. In California, a small business owner received funding to expand his custom cabinetry 

business in Sacramento.
Filling the Small Business Lending Gap 

LIST OF FIGURES

Figure 1 SSBCI Loans or Investments for Loan Programs, by Age of Business (Cumulative through 

2012)

Figure 2 Jobs Created and Retained for Loan Programs, by Age of Firm (Cumulative through 2012)

Figure 3 Number of Loans Made in LMI Areas (Cumulative through 2012)

Figure 4 Lending Activity and Job Impacts in LMI Areas, by Type of Loan Program (Cumulative 

through 2012)

Figure 5 Number of Loans and Amount Loaned or Invested for Loan Programs, by Type of Lending 

Institution (Cumulative through 2012) 

Figure 6 Top 15 Largest SSBCI Lenders for Loan Programs, by Dollar Amount Loaned (Cumulative 

through 2012)

Figure 7 Percent of Lending Activity in LMI Areas, by Lender Type (Cumulative through 2012)

Figure 8 Jobs Created and Retained for Loan Programs, by Type of Lender (Cumulative through 2012)

Figure 9 SSBCI Program Activity for Loan Programs, by Type of Managing Organization (Cumulative 

through 2012) 

Figure 10 Dollars Expended and Number of Loan Transactions per Loan Program, by Type of Managing 

Organization (Cumulative through 2012) 

Figure 11: Proportion of SSBCI Funds Expended for Loan Programs, by Agency Type (Cumulative 

through 2012)

Figure 12: Percent of Loan Program Allocation Deployed, by Type of Organization (Cumulative through 

2012)

Figure 13: Top 15 States in SSBCI Funds Used for Loan Programs Only, Ranked by Percent (Cumulative 

through 2Q 2013)

Figure 14: Jobs Created and Retained for Loan Programs, by Type of Organization (Cumulative through 

2012)
Filling the Small Business Lending Gap 

i

Executive Summary

Section 1: Setting the Context

A. Introduction and Project Background

The State Small Business Credit Initiative (SSBCI) creates an important new catalyst for promoting small 

business lending and investing. Established by the 2010 Small Business Jobs Act, SSBCI is a collaborative 

program funded by the U.S. Department of the Treasury (Treasury), managed by the states and their 

contractors, and implemented through the participation of private sector lenders and investors. The 

goal of this $1.5 billion program is to use a limited investment of public resources to leverage private 

sector capital for small businesses.

Several aspects of SSBCI merit special mention:

1. SSBCI creates an innovative funding model: the federal government set outcome parameters –

10:1 private sector leverage within five years—and let states decide how to design and 

implement the program. State SSBCI programs support private sector lending or investing by 

sharing in the lender or investor’s risk of loss. The private sector bears a significant 

responsibility for evaluating creditworthiness and program compliance. This federal-to-state-toprivate lender-to-small business arrangement is the distinguishing feature of SSBCI’s structure. 

States do not repay the SSBCI funds to Treasury; the state keeps the money as an ‘evergreen’ 

fund that recycles into new loans.

2. States choose from five basic types of programs (four loan programs or a state-run venture 

capital program), and they customize the rules to suit local market conditions. To date, 

community banks and mission-oriented lenders are the major participants in the loan programs, 

in part because they often specialize in serving small businesses that do not fit a traditional 

credit profile. 

3. States implement the program through state agencies, quasi-public authorities or private

contractors. This allows a state to operate its SSBCI program through whatever organizational 

structure exists in the state with the business lending experience and capacity to execute. 

State experimentation with SSBCI credit enhancements offer lessons for policymakers seeking to 

strengthen their own SSBCI programs as well as other state business financing initiatives. 

This document summarizes the results of a year-long study by the Center for Regional Economic 

Competitiveness (CREC) that focused exclusively on the SSBCI loan programs. Based on data released 

through the end of 2012, the loan programs comprised 73 percent of the SSBCI funds requested by 

states, while equity capital programs received the remaining 27 percent of funds requested. Cromwell 

& Schmisseur (February 2013) analyzed SSBCI equity programs.

This report examines how states are using the SSBCI allocations, what they are learning from the SSBCI

experience, and how state policy leaders and program managers can further improve the volume of 

lending and achieve their individual program goals. 
Filling the Small Business Lending Gap 

ii

B. Promoting Small Business Finance in the Wake of the Economic Crisis

In early 2010, the nation was in the midst of the most severe financial crisis since the Great Depression. 

Small businesses were particularly hard-hit when commercial lending standards tightened. Many banks 

turned away from small business customers, even those with the ability to repay a loan, particularly if 

the business operated for a short period of time, lacked sufficient borrower equity, possessed devalued 

real estate or equipment collateral, or had suffered a sudden depletion of cash due to the economic 

crisis. In response, SSBCI programs seek to help creditworthy small businesses address these 

weaknesses. With SSBCI assistance, these small businesses can come into compliance with bank 

underwriting criteria.

SSBCI programs tend not to compete with government-guarantee programs offered by the Small 

Business Administration and the Department of Agriculture. Instead, SSBCI’s flexibility is well-suited to 

complement those programs by filling gaps created by those programs’ limitations on the size or types 

of loans, the eligibility of certain types of borrowers, the use of loan proceeds, or the type of lender. 

SSBCI enlists state economic development agencies because of their insights into local small business 

capital needs and their capacity to respond to state priorities. SSBCI program rules establish minimum 

private leveraging standards—per transaction, per program, and overall for each state—that motivate 

states to experiment and improve on previous state loan programs. 

New loan program models, such as collateral support and purchased loan participation programs are a 

potential legacy of the SSBCI program. The federal funding provides states with a source for learning

from each other’s experience. The result is that states are introduced to new and more sophisticated 

credit enhancement tools that can engage the private sector to expand the amount of credit available to 

small business. 

Historic Development of State Loan Programs

States have introduced a range of loan programs that increase access to small business loans

Pre-1970s States introduce direct loan programs and low-interest rate loans, some of which are 

funded with tax-exempt bonds.

1970s Loan guarantee programs begin in states such as California, Maryland, and elsewhere.

1980s States develop new loan portfolio reserve models, including capital access programs

launched in over 20 states.

2008 Michigan creates the first collateral support program.

2011 SSBCI provides funding for these loan programs plus loan participation programs. 
Filling the Small Business Lending Gap 

iii

Section 2: SSBCI Product and Portfolio Analysis

A. SSBCI Loan Products

SSBCI supports four types of loan programs (listed in order of the SSBCI allocated funding): 1

1. Loan participation program (LPP), including two sub-types that are economically the same, but 

entail different staff skills and administrative costs:

(a) direct companion loan, in which the state makes a direct loan that closes at the same time 

as a larger private sector loan; 

(b) purchased participation, in which the state purchases a portion of a loan after it has been 

made by the lender;

2. Loan guarantee program (LGP), in which a state guarantees a portion of the loss on a loan; 

3. Collateral support program (CSP), in which a state pledges cash collateral to a lender when the 

borrower’s collateral does not meet the lender’s requirements; and

4. Capital access program (CAP), in which the borrower, bank and state contribute to a reserve 

account held by the lender to cover its losses until the account is depleted.

B. How SSBCI Assists Small Businesses

Through 2012, states2 expended slightly more than $190 million in SSBCI funds through the loan 

programs, drawing into the market over $1.4 billion in new private loan capital. This performance 

represents approximately $7 private lending for each dollar of SSBCI funds. Based on data reported by 

the states, these 4,439 loans resulted in an estimated 14,500 new jobs created and nearly 33,900 

existing jobs retained that were at risk of loss. (These figures do not include the results from the SSBCI 

equity programs.)

Notably, lenders made a significant number of SSBCI-supported loans to underserved sectors:

• Companies five years old or younger received half the SSBCI dollar loan volume. 

• Small companies with fewer than 50 employees received 96 percent of SSBCI loans, and 80 

percent of the borrowers employed 10 or fewer employees. 

• Companies in low- and moderate-income areas received 42 percent of the SSBCI loans.

The average size of SSBCI loans was about $319,000, and two-thirds of the loans were below $100,000. 

Community banks made nearly 60 percent of the dollar volume of SSBCI-supported loans. Community 

banks and Community Development Financial Institutions (CDFIs) together accounted for 87 percent of 

the number of those loans. 

 1 A Summary of States’ 2012 Annual Reports, available at www.treasury.gov/ssbbci, presents performance data on 

the SSBCI programs.

2 Treasury awarded allocations to 47 states, the District of Columbia, five territories, and municipalities in the three 

states that either did not apply or withdrew their application. For convenience, this report refers to all the entities 

that received allocations as “states.” The amount of each state’s allocation was determined by a funding formula 

in the legislation.
Filling the Small Business Lending Gap 

iv

C. Organizational Structures that Deliver State Business Loan programs

CREC examined the track record of the different organizational structures deploying SSBCI capital. An 

appendix lists the advantages and disadvantages of the three structures.

• State economic development agencies (35 states3

, 63 programs). These agencies are traditional 

government bodies led by a member of a governor’s cabinet. The agencies follow state 

personnel, procurement, and information transparency rules and regulations. These agencies 

function under the normal state budgeting system and require state legislative authority to 

spend dollars. For the most part, state agencies operate the SSBCI programs within an existing 

government bureaucracy that manages loan programs under the same pre-existing rules and 

regulations that must be followed for other state business assistance programs. 

• Quasi-public, state-chartered authorities (15 states, 31 programs). These quasi-public 

authorities are created by state legislation to achieve a specified mandate and are typically 

governed by boards consisting of gubernatorial or legislative appointees with business or 

banking expertise. Typically, the chief executive officer is selected by the governor in 

consultation with an advisory board or by the authority’s board with the consent of the 

governor. Staff members of these authorities are often experts in their field. Quasi-public 

authorities operate as hybrids of state agencies and private contractors: while they can operate 

outside of state agency legal frameworks to some extent, they also have many of the 

characteristics of a state agency. The state government can often delegate authority and 

transfer funds to state-chartered authorities more expeditiously than to private contractors.

• Private contractors, either non-profit or for-profit entities (9 states, 16 programs). In some 

states, private entities oversee the use of SSBCI funds; manage lender relationships; handle

compliance activities; and report on results. The state maintains responsibility for performance 

and compliance. Examples of these private contractors include statewide not-for-profit 

economic development agencies, SBA certified development companies, CDFIs, and for-profit 

business development companies. 

Through 2012, private contractors expended $2.6 million per loan program and quasi-public authorities 

expended $2.4 million per loan program, more than double the $1.2 million expended by state agencies.

States that used SSBCI funds more slowly encountered headwinds that impeded progress: 

• Half of the state programs did not exist prior to the availability of SSBCI funds. These states 

needed to hire new staff, write new program rules and build new lender relationships.

• States allocated a significant share of the SSBCI funds to CAPs, a type of program that lenders 

used extensively in the 1990s and 2000s. The CAP model depends on lenders originating 

 3 Some states deploy SSBCI funds through multiple organizational structures, so a state may be listed in more than 

one category.
Filling the Small Business Lending Gap 

v

enough loans to build up a reserve account to absorb losses. This feature deterred smaller 

volume lenders. National banks said CAPs did not provide sufficient credit support to overcome 

the perceived risk of lending in the post-recession environment. As a result, many states later 

reallocated the SSBCI funds out of CAPs and into other eligible programs. 

• From 2010-2013, the economic development efforts of at least 13 states were significantly 

restructured through the creation of new state agencies or quasi-public authorities. Other 

states experienced turnover of leaders or crucial staff, which inevitably slowed ramp-up.

• Some states divided the allocation into multiple SSBCI loan programs with multiple contractors 

to implement them, creating management challenges.

• Some territories and municipalities comprise a small market area with little banking activity and 

therefore present a challenging environment in which to deploy SSBCI funds.

Section 3: Lessons Learned and Recommendations

A. Lessons Learned

By the spring of 2013, each state had operated its SSBCI programs for at least one full year. Based on 

the early program performance, as well as CREC’s experience with commercial lending and economic 

development programs, the following lessons learned may assist state policy makers and state program 

managers:

Program Priorities

• Strong state leadership facilitates SSBCI execution and impact. States execute SSBCI programs 

rapidly when they enjoy a long-standing consensus about the importance of small business 

lending to the state's economic development. 

• Some states integrate SSBCI into multi-faceted economic development strategies. By engaging 

the governor’s office in developing solutions to the state’s lending needs, SSBCI encourages

collaborations across state agencies and with private lenders. SSBCI program rules give states 

the flexibility to fill gaps in their economic development strategies. 

• States seek to harmonize two priorities— using SSBCI to promote small business lending as 

quickly as possible, while also targeting the types of businesses that create long-term economic 

benefits. What ultimately constitutes “success” differs among the states, but the early emphasis 

on deploying the SSBCI funds rapidly encouraged states to broaden their lending targets. After 

SSBCI funds have been fully drawn, some states may re-focus on narrower development goals.

• Some states choose to monitor SSBCI impacts beyond the initial focus on loan deployment.

Treasury requires certain loan-by-loan data to be reported annually. A few states gather 

additional information from the outset, or they re-survey borrowers after the loan is made. 
Filling the Small Business Lending Gap 

vi

Program Design

• The most attractive SSBCI programs are simple to explain and operate. These programs create

a process that is easy to use, is responsive to lender needs, and reduces potential burdens on

lenders or borrowers wherever possible. Successful states also seek to develop lender-friendly 

loan management processes. Lenders do not want to participate in programs that create delays 

or uncertainty. The most pro-active states create expedited processing systems that become 

part of the program’s marketing to lenders. 

• States are most effective in deploying SSBCI funds when the programs fill product niches that 

can be clearly described. The most frequently heard credit gaps were for loans that:

 Do not meet the guidelines for SBA or USDA loan guarantee programs; 

 Require some credit support, but do not justify the cost and paperwork of a typical 

government-guarantee program; 

 Help nonprofit organizations; and 

 Provide short-term working capital and bridge financing. One emerging use of SSBCI 

loan programs is to support construction loans prior to the closing of permanent 

financing from the SBA 504 program.

• All four types of SSBCI loan programs have succeeded in at least a few states, but certain 

program types are initially more appealing to lenders. Subordinated LPPs and CSPs are two 

relatively new program models that SSBCI introduced in many states. Lenders are initially more 

comfortable with programs that reflect standard banking practices (like LPPs or LGPs). On the 

other hand, CSPs and CAPs have economic benefits for lenders who understand them. 

• Lenders are interested in SSBCI programs that solve a clearly identified borrower credit issue.

Lenders do not want to make ‘risky’ loans. Instead, lenders use SSBCI loan programs to address

an identified credit weakness that brings otherwise creditworthy loan requests into

conformance with the lender’s credit standards.

• Typically, the high-volume lending products subordinate the state’s collateral interests to the 

private lender’s interests. These states balance the lender’s interest in mitigating its risk of loss 

with the state’s desire to leverage its limited resources to the greatest extent. In all SSBCI 

programs, lenders must have meaningful capital at risk, which reduces the possibility of adverse 

selection of loans that are unlikely to repay. States determine whether to re-evaluate the 

lender’s credit underwriting of the loan.

Program Marketing

• SSBCI’s credibility with state policy leaders and lenders depends on whether the program 

receives high-level endorsement and visibility. SSBCI is a program designed for states and

lenders. Successful programs generate attention and buy-in from state policy leaders. And 

when policy makers embrace the SSBCI program, it results in positive attention and improved 

outcomes in the lender community.
Filling the Small Business Lending Gap 

vii

• SSBCI is well-suited to lenders that “hand craft” loan terms to a customer, which is a business 

model characteristic of community banks and CDFIs. SSBCI programs enroll loans from all 

approved lenders. Some large-volume lenders are less interested in loans with non-standard 

terms or collateral, or loans with complex multi-layered financing. These “hand crafted” loans 

can be readily processed through state SSBCI programs.

• Successful marketing campaigns initially target a specific group of small business lenders. To get 

started, states target the small business lenders who are well-known in the local market. 

Successful states find a “champion” who is willing to learn the SSBCI program rules and then 

offer testimonials to other lenders. State programs typically build the base of participating 

lenders one-by-one based on in-person sales calls.

• State managers must demonstrate the value of the SSBCI program to lenders' key executives as 

well as to loan officers. A multiple-touch, in-person marketing approach is necessary to attract 

financial institutions. Buy-in must occur among both senior executives and lending officers.

Program Implementation

• While states can be effective in managing SSBCI programs through any of three different 

organizational structures, quasi-public authorities and private contractors deployed SSBCI funds 

most rapidly so far. Where existing financing organizations or programs have the confidence of

state leaders, states often allocate SSBCI funds to them. Often, quasi-public authorities and 

private contractors have program staff with commercial lending experience and pre-existing 

lender relationships that enable them to launch new loan programs quickly.

• Successful states use three strategies to achieve the overall 10:1 private leverage targets: 

recycling of funds, participating in transactions with multiple loans, and reducing the amount of 

SSBCI support per loan. To approve an SSBCI application, Treasury requires each state to 

demonstrate a “reasonable expectation” that its combined programs will achieve $10 in private 

leverage for every $1 in federal contribution. Most states find that providing less than 10 

percent credit support for each loan is insufficient to attract lenders’ interest. Therefore, states 

employ three strategies: (1) recycle funds quickly through shorter-term loans such as working 

capital loans and construction and bridge financing, (2) combine SSBCI-supported loans as part 

of a larger financing package with other loans, and (3) reduce the percentage of SSBCI support

per loan, once a program becomes widely accepted in a state.

• States build success based on relationships of trust and dependability between the state’s SSBCI 

program and participating lenders. The relationship begins with staff knowledge about 

commercial lending. These relationships also depend on strong communication and followthrough on any promises made during the loan approval, closing, and servicing process.

• Early evidence suggests that states working through mission-oriented lenders have the greatest 

success in reaching underserved borrowers. Several states use CDFIs and revolving loan funds 

to reach underserved groups (including California, Georgia, Montana, Pennsylvania and 
Filling the Small Business Lending Gap 

viii

Washington). These specialized lenders help states reach underserved populations, including

young companies, small companies, and companies located in LMI areas.

• By paying close attention to compliance with federal rules, many states avoid potential missteps 

that could slow progress. SSBCI represents a classic problem for stimulus programs designed to 

affect the economy quickly. The program funds must be deployed rapidly and with proper 

stewardship. Achieving results requires all due speed. Protecting taxpayer interests also 

requires continued diligence, including documenting program compliance.

Program Sustainability

• To date, only a few states have focused on what will happen to their SSBCI programs after the 

program ends in 2017. In some states, the programs will continue after 2017 because the quasipublic authorities or private contractors that operate the program will retain the funds 

permanently. 

B. Recommendations for State Policymakers and Program Managers

Based on the observations made throughout this report, CREC offers the following recommendations to 

state policy makers and state program managers: 

(1) Expand the SSBCI program’s outreach.

A. Focus marketing and outreach efforts on lenders that can be converted to SSBCI “power

users.” 

State program managers should analyze the state’s banking sector and target institutions that seem 

most aligned with the mission of SSBCI. Sometimes these are smaller community banks. States 

should focus the outreach on institutions that the state expects to provide the bulk of SSBCI loans. 

B. Define SSBCI lending niches clearly, and in ways that complement other government loan 

guarantee programs. 

States should develop clear messages about how the SSBCI programs address lender needs and 

complement available SBA and USDA loan guarantee programs. 

C. Develop marketing materials that leverage public relations and free media.

States should consider creating a marketing toolkit—working collaboratively if they wish— with the

most persuasive program and/or product messages. The toolkit could also provide templates of 

success stories that explain how the program addresses a specific credit weakness. This toolkit 

would include a strategy for using the marketing materials.

(2) Consider hiring staff with prior lending and compliance experience.

A. Hire staff with commercial lending experience and/or train SSBCI staff in the sales 

process.

Programs staffed by experienced lenders understand the loan underwriting process and constraints 

under which lenders operate. States should consider independent training sources to equip state 

program staff with improved selling and loan servicing skills. 
Filling the Small Business Lending Gap 

ix

B. Employ dedicated compliance officers. 

Employing a compliance officer—even on a contract basis—can help avoid inadvertent problems

that can result in significant compliance issues and/or costs.

(3) Encourage continued program review and innovation.

A. Host or participate in on-site peer-to-peer program panel reviews.

States should consider organizing three-person panels composed of other states’ program managers 

to provide an outside peer assessment of the state’s programs and lending environment. 

B. Conduct structured product and process innovation working sessions to refine SSBCI 

operations and respond to on-going market changes.

States should conduct periodic working sessions with stakeholders (internal staff, lenders, in-state 

experts, and other key partners) to adapt product offerings as market conditions change. 

(4) Enhance understanding of SSBCI’s impacts.

A. Consider expanding future state loan tracking systems to gather data on race/ethnicity, 

gender, and veteran status of borrowers to the extent the law allows.

As states continue to originate more SSBCI loans, they should consider collecting additional data

that can tell a compelling story about how SSBCI addresses underserved credit markets.

B. Consider how to validate program impacts on small businesses. 

States should consider developing a process for validating data on employment, jobs 

created/retained, and total borrower revenues after the loan has closed and the business invests

the capital that SSBCI has made available.

C. Consider upgrading processes and information management tools to monitor loan 

performance. 

As the size of the loan portfolio increases, the state managers’ workload will shift to portfolio 

monitoring, which requires adequate management skills and computerized systems. States with 

sufficient loan volume should consider developing a real-time tracking system to manage 

transactions from application to loan payoff. An accurate loan tracking system can provide “realtime” insights about the small business credit markets, SSBCI’s progress in improving those markets, 

and the quality of the SSBCI loan portfolio. 

(5) Foster increased use of SSBCI funds to reach underserved populations.

A. Adopt best practices from states that reach underserved populations by engaging CDFIs 

or other specialized lenders.

States should consider expanding relationships with these specialized lenders. States may need to 

provide CDFIs and other lenders with administrative funding necessary to originate and service loans 

to underserved populations.

B. Develop strategies to engage younger companies and the financial institutions with 

track records in lending to them. 

Research indicates that young companies are more likely to be job creators than more mature 

companies. States should consider special outreach to young companies and the lenders that serve 
Filling the Small Business Lending Gap 

x

them. States may consider lower borrower fees or subsidized interest rates for “young” job-creating 

companies. 

C. Experiment with credit support program models to encourage greater usage of SSBCI in 

low- and moderate-income areas.

States should experiment with methods to sustain and enhance lending in LMI areas by lowering the 

private leverage expectation for loans in LMI areas. Some states lower fees for borrowers in 

underserved groups or businesses located in LMI areas. CAPs are notably successful in California, 

New York, and Michigan in reaching companies that are smaller, younger and located in LMI areas. 

Although lenders have not used CAPs widely in other states, in the future, states should consider 

testing whether higher match rates or providing start-up funds for each lender’s reserve account 

might increase lender interest in CAPs.

(6) Plan for long-term program sustainability.

A. Analyze the revenue and costs associated with managing SSBCI loan programs.

Purchased LPPs may provide the greatest net earnings potential of all the different SSBCI loan 

programs. States need to better understand the administrative costs as well as the net costs of 

servicing the various credit enhancement programs.

B. Develop a clear plan for maintaining the state’s program beyond 2017.

States have an opportunity to maintain the SSBCI institutional infrastructure and lending 

relationships into the future. To do so, states must address two important questions:

• Where will the states find additional capital to continue the credit enhancement programs in 

2017 and beyond?

• How will the states fund the administrative costs of the programs after federal SSBCI 

administrative support ends in 2017?

The states should capitalize on their investment of time and money to continue SSBCI programs into 

the future. A key element of this plan should be determining how best to manage the revolving 

federal funds when all of the funds have been deployed and then again when SSBCI allocations lose 

their federal character after 2017. 

Treasury publishes a variety of reports on SSBCI available at www.treasury.gov/ssbci, including:

• Program Profiles: Descriptions of the features of the SSBCI loan and equity products.

• Best Practices from Participating States: Peer-to-peer advice on starting and managing 

SSBCI programs.

• Summaries of States’ Annual Reports and Quarterly Reports: Program statistics and 

analysis of the states’ use of SSBCI funds.