Small Business Lending Fund

2014 President’s Budget
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Table of Contents

Section 1 – Purpose ....................................................................................................................... 3

1A – Mission Statement.............................................................................................................. 3

1.1 – Program Account Summary............................................................................................... 3

1.2 – Financing Account Summary ............................................................................................ 3

1.3 – Program Disbursement, Repayments, and Cost/Savings................................................... 3

1B – Vision, Priorities and Context............................................................................................ 4

Section 2 – Budget Adjustments and Appropriation Language............................................... 6

2.1 – Budget Adjustments Table................................................................................................. 6

2A – Budget Increases and Decreases Description..................................................................... 6

2.2 – Operating Levels Table...................................................................................................... 7

2B – Appropriations Language and Explanation of Changes..................................................... 7

2C – Legislative Proposals.......................................................................................................... 7

Section 3 – Budget and Performance Plan ................................................................................. 8

3A – SBLF Program ................................................................................................................... 8

3B – SBLF Administration ....................................................................................................... 10

Section 4 – Supplemental Information...................................................................................... 11

4A – Summary of Capital Investments..................................................................................... 11
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Section 1 – Purpose

1A – Mission Statement

The Small Business Jobs Act of 2010 (P. L. No. 111-240) (the “Act”) established the Small 

Business Lending Fund (“SBLF”). The SBLF is a dedicated fund designed to provide capital to 

qualified community banks (including banks, thrifts, and bank and thrift holding companies) and 

community development loan funds (CDLFs) with consolidated assets of less than $10 billion in 

order to encourage small business lending. The purpose of the SBLF is to encourage Main Street 

banks and small businesses to work together, help create jobs, and promote economic growth in 

communities across the nation. 

1.1 – Program Account Summary

Dollars in Thousands

 FY 2012 FY 2013 FY 2014 FY 2012 to FY 2014

 Actual Estimated Estimated $ Change % Change

AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT

Obligations

Small Business Lending Fund Program 

Account 22,831 24,707 20,469 (2,362) -10.35%

Total Obligations $22,831 $24,707 $20,469 (2,362) -10.35%

Budget Authority 

Small Business Lending Fund Program 

Account 22,831 24,707 20,469 (2,362) -10.35%

Total Budget Authority $22,831 $24,707 $20,469 (2,362) -10.35%

Outlays

Small Business Lending Fund Program 

Account 23,000 24,000 20,000 (3,000) -13.04%

Total Outlays $23,000 $24,000 $20,000 (3,000) -13.04%

*Amounts may differ from those printed in the FY 2014 President’s Budget Appendix due to rounding.

1.2 – Financing Account Summary

Dollars in Thousands

 FY 2012 FY 2013 FY 2014 Change % Change

 Actual Estimated Estimated FY 2012 to FY 

2014

FY 2012 to FY 

2014

AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT

Small Business Lending Fund 

Finance Account

Obligations 0 0 0 0 0.00%

Collections 164,000 975,000 457,000 293,000 178.66%

Financing Authority (net) 376,000 (967,000) (381,000) (757,000) -201.33%

Financing Disbursements (net) 298,000 (889,000) (381,000) (679,000) -227.85%

1.3 – Program Disbursement, Repayments, and Cost/Savings 

Dollars in Billions

Cumulative 

Obligated

Cumulative 

Disbursed

Cumulative 

Outstanding 

(Includes 

Realized Losses)

Total 

Cumulative 

Income

Total 

Cumulative 

Repayments

Total 

Estimated 

Life Costs

SBLF Program 

Investments 4.03 4.03 3.98 0.11 0.05 -0.05

Total $4 $4 $4 $0 $0 ($0)
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1B – Vision, Priorities and Context

Summary of SBLF Program Activity – FY 2012

SBLF supports the Treasury strategic goal, “repair and reform the financial system and support 

the recovery of the housing market.” In total, the SBLF invested $4.03 billion in 332 community 

banks and CDLFs.

In FY 2012, the SBLF program office transitioned from its FY 2011 focus on application review 

and transaction execution activities to investment management, operations, compliance and 

controls, and outreach and reporting activities. 

Specifically, the SBLF program office focused on the following activities:

Investment Management: SBLF monitored the SBLF investment portfolio and made 

recommendations to senior Treasury officials on decisions related to investment performance 

and activities.

Operations: SBLF managed the program’s data and information in connection with participant 

reporting, dividend and interest payments, and capital repayments. 

Compliance and Controls: SBLF developed a compliance program which monitors participant 

conformance with program terms, including lending data, certification requirements, and other 

requirements provided for by the SBLF Securities Purchase Agreement. SBLF also developed

and executed internal control procedures for processes across SBLF program office functions.

Reporting and Outreach: SBLF continued its outreach and reporting efforts in FY 2012. These 

activities included reporting to Congress on the program’s transactions, costs, and the 

participants’ use of funds, correspondence, and developing and distributing the program’s first 

annual lending survey.

Summary of SBLF Program Goals for FY 2013, FY 2014 and Forward

For FY 2013 and forward, the SBLF program office plans to continue its focus on investment

management, dividend and interest operations, compliance and oversight, and outreach and 

reporting.

Investment Management: SBLF plans to continue to monitor the SBLF investment portfolio and 

make recommendations to senior Treasury officials on decisions related to investment 

performance and activities.

Operations: SBLF plans to continue to manage the program’s data and information in 

connection with participant reporting, dividend and interest payments, and capital repayments. 

Compliance and Controls: SBLF plans to continue to execute a compliance program to monitor 

participant conformance with program terms, including lending data, certification requirements, 

and other requirements provided for by the SBLF Securities Purchase Agreement. SBLF also 

plans to continue executing internal control procedures for processes across SBLF program 

office functions.

Reporting and Outreach: SBLF plans to continue its outreach and reporting efforts. These 

activities include reporting to Congress on the program’s transactions, costs, and the participants’ 
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use of funds, correspondence, and publishing the results of the program’s first annual lending 

survey and issuing the second annual survey.

Summary of Office of Inspector General (OIG) Activity

In FY 2014, the OIG will continue to provide audit and investigative oversight of the SBLF. The 

authorizing legislation for this small business lending initiative requires the OIG to conduct, 

supervise, and coordinate audits and investigations of the SBLF program and to issue a program 

oversight report no less than twice a year to the Congress and the Secretary of the Treasury. 

The 2014 budget request will support the 12 SBLF-OIG employees and allow the OIG to

augment its resources with contractors, as needed, to perform audits of financial institutions 

receiving SBLF investments. The OIG's efforts in FYs 2014 and beyond will primarily focus on 

audits of selected financial institutions to determine whether they accurately reported their levels 

of small business lending activity to Treasury and how they have used their funds. Because the 

dividend rate that participants pay on Treasury's investment is based on the unverified lending 

activity reported by each institution, the OIG's audits will provide Treasury with assurance that 

participant reports can be relied upon when determining dividend rates and when assessing the 

effectiveness of the SBLF program. The OIG’s efforts will also focus on Treasury’s 

management of securities purchased with SBLF funds.
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Section 2 – Budget Adjustments and Appropriation Language

2.1 – Budget Adjustments Table

Dollars in Thousands

Small Business Lending Fund FTE Amount

FY 2012 Actual 27 $22,831

FY 2013 Estimated 28 $24,707

Changes to Base:

Maintaining Current Levels (MCLs): - $444

Pay-Raise - $29

Non-Pay - $415

Subtotal Changes to Base - $444

Total FY 2014 Base 28 $25,151

Program Changes:

Program Decreases: (3) ($4,682)

Staff/Contract Update (3) ($4,682)

Total FY 2014 Estimated 25 $20,469

2A – Budget Increases and Decreases Description

Maintaining Current Levels (MCLs) .........................................................+$444,000 / +0 FTE

Pay-Raise +$29,000 / +0 FTE 

The President’s Budget proposes a one percent pay raise for Federal employees in 2014.

Non-Pay +$415,000 / +0 FTE 

Funds are requested for inflation adjustments in non-labor expenses such as GSA rent 

adjustments, postage, supplies and equipment.

Program Decreases .....................................................................................-$4,682,000 / -3 FTE

Staff/Contract Update -$4,682,000 / -3 FTE 

Reductions in contract support and other adjustments.
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2.2 – Operating Levels Table

Dollars in Thousands

Small Business Lending Fund FY 2012 FY 2013 FY 2014

Object Classification Actual Estimated Estimated

11.1 - Full-time permanent 3,074 2,819 2,655

11.9 - Personnel Compensation (Total) 3,074 2,819 2,655

12.0 - Personnel benefits 814 990 954

Total Personnel and Compensation Benefits $3,888 $3,809 $3,609

21.0 - Travel and transportation of persons 20 20 20

23.1 - Rental payments to GSA 505 505 505

25.2 - Other services 13,226 17,309 13,480

25.3 - Other purchases of goods & serv frm Govt accounts 5,056 2,949 2,740

26.0 - Supplies and materials 136 115 115

Total Non-Personnel 18,943 20,898 16,860

Total Budgetary Resources $22,831 $24,707 $20,469

Budget Activities:

SBLF Administration 22,831 24,707 20,469

Total Budgetary Resources $22,831 $24,707 $20,469

FTE 27 28 25

*Amounts may differ from those printed in the FY 2014 President’s Budget Appendix due to rounding.

2B – Appropriations Language and Explanation of Changes

SBLF does not receive any discretionary appropriation authority from Congress. Therefore, no 

appropriations language is proposed.

2C – Legislative Proposals

SBLF has no legislative proposals in the FY 2014 budget.
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Section 3 – Budget and Performance Plan

3A – SBLF Program 

($0 of obligations in FY 2013 and FY 2014)

All investment activity occurred in FY 2011. The cost of purchases of preferred stock and other 

financial instruments made as capital investments are required by law to be determined as 

provided under the Federal Credit Reform Act (FCRA). 

The total program volume and anticipated repayments are reflected in the SBLF financing 

account (table 1.2). This non-budgetary account records all cash flows to and from the federal 

government resulting from direct capital obligated in 2011 and beyond. The amounts in this 

account are a means of financing and are not included in the budget totals.

Treasury completed investments in 332 institutions for a total of $4.03 billion in capital invested. 

Based on reports from participating institutions as of the third quarter 2012, program participants 

have increased their qualified small business lending by $7.4 billion over baseline levels. As of 

March 13, 2013, 12 institutions with aggregate investments of $112.6 million have fully 

redeemed their SBLF funding and exited the program, and nine institutions have partially 

redeemed $107.8 million of their SBLF funding though continue to participate in the program.

The Small Business Jobs Act of 2010 includes specific reporting requirements for SBLF. The 

legislation requires the quarterly reporting of funds used by participating banks, a semi-annual 

report on administrative costs and a report on the program’s impact on small business lending 

among women-, minority-, and veteran-owned businesses. 

In accordance with these statutory requirements, Treasury has published 34 transaction and 

program reports, including a detailed study of the impact of the SBLF program on women-, 

minority-, and veteran-owned businesses, as well as five quarterly “Use of Funds” reports. In 

addition, Treasury plans to expand program reporting with respect to how SBLF funds were used 

with an annual lending survey completed by all program participants. 

The SBLF program completed the review and, if applicable, funding of all eligible program 

applicants by the September 27, 2011 statutory deadline. 

The SBLF program office developed a set of asset management performance measures to 

continually monitor the impact of the Fund’s investments and the efficiency of its operations. 

The measures address two aspects of program performance:

1. Efficiency Measures (to assess the administrative aspects of the program)

a. Monitoring of investment portfolio condition

b. Review of compliance and supplemental report submissions by participants

c. Publication of reports as required by statute

In FY 2012, the SBLF program office has (a) produced, on a quarterly basis, portfolio 

monitoring reports that include institution-specific credit scores, dashboards, and watch

lists; (b) maintained a record of compliance submissions and implemented an analytical 
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process for identifying errors in supplemental report submissions; and (c) published all 

reports required by the Small Business Jobs Act of 2010. 

2. Outcome Measures (to assess the impact of the program on small business lending)

a. Increase in small business lending by participating institutions

b. Increase in business lending by participating banks versus comparable institutions

c. Receipt of expected interest and dividend payments by participating institutions

As of September 30, 2012, SBLF participants have increased their small business lending by 

$7.4 billion over a $36.5 billion baseline, and by $740 million over the prior quarter. 

Increases in small business lending are widespread across SBLF participants, with 89 

percent of participants having increased their small business lending over baseline levels. 

Over three-quarters of SBLF participants (78 percent) have increased small business 

lending by 10 percent or more. Over the same period, banks participating in SBLF have 

increased business loans outstanding by a median of 32.2 percent over baseline levels, 

versus a 5.7 percent median increase for a representative peer group of non-SBLF banks 

and a 2.1 percent median increase for a broader comparison group non-SBLF banks. As 

of December 31, 2012, all participants have made all expected interest and dividend 

payments for a total of $82 million in payments received.

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

positive return of $50 million for the Treasury General Fund. The figures in the following table 

reflect Treasury’s calculation of the estimated cost of SBLF investments in the President’s 

Budget for FY 2014. 

Estimated Cost of SBLF Investments

(Dollars in millions)

Treasury estimated the program’s budget cost in conformance with the FCRA methodology 

using actual program data for fiscal years 2011 and 2012. This data, combined with the expected 

future cash flows, results in a subsidy rate of -1.26 percent compared to an original subsidy rate 

of 7.24 percent.

Per FCRA requirements, the lifetime cost and subsidy rate of the SBLF program is estimated on 

a present value basis. Assumptions used to estimate future cash flows include, but are not limited 

to: (1) the cumulative default rate for program participants, (2) the cash flows received by 

Treasury from the participants’ dividend, interest, and other payments, and (3) Treasury’s cost of 

raising funds to make SBLF investments.
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The current estimate of the program’s projected lifetime savings incorporates a forecasted 

cumulative default rate (i.e., lost principal investments) of 3.78 percent compared to a 4.29 

percent rate in the prior year’s estimate.[1] This lower rate reflects an overall improvement in the 

financial condition of program participants and, independent of other factors, would result in 

greater projected lifetime savings for the program. The current year estimate also incorporates, 

however, a reduction in expected lifetime dividend and interest payments to Treasury as a result 

of higher-than-projected increases in small business lending by program participants, in 

accordance with the lending incentives provided for by the Act. Changes in economic 

projections also contributed to the decrease in program cost. Inclusive of these changes, the 

projected program lifetime savings is $50 million.

3B – SBLF Administration

($24,707,000 of obligations in FY 2013; $20,469,000 of obligations in FY 2014)

The authority to pay administrative expenses is provided by Section 4108(b) of the Act.

Administrative expenses include the costs of government employee salaries, contract support, 

and reimbursement to the Treasury Office of Inspector General for program audits. Treasury is 

required by law to submit semi-annual reports to the appropriate committees of Congress 

detailing administrative expenses.

 

[1] The forecasted cumulative default rate represents the projected investment amounts not repaid by program participants as a 

percentage of all SBLF investments. The rate is estimated based on the financial condition of program participants relative to the 

historical performance of institutions rated by the major ratings agencies.
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Section 4 – Supplemental Information

4A – Summary of Capital Investments

SBLF uses Departmental Office’s (DO) systems and is part of DO’s capital investment strategy.u