(10) STATE CAPITAL ACCESS PROGRAM.—The 
term ‘‘State capital access program’’ means a pro-
gram of a State that— 
(A) uses public resources to promote pri-
vate access to credit; and 
(B) meets the eligibility criteria in section 
5(c). 
(11) STATE
OTHER
CREDIT
SUPPORT
PRO-
GRAM.—The term ‘‘State other credit support pro-
gram’’— 
(A) means a program of a State that— 
(i) uses public resources to promote 
private access to credit; 
(ii) is not a State capital access pro-
gram; and 
(iii) meets the eligibility criteria in 
section 6(c); and 
(B) includes, collateral support programs, 
loan participation programs, and credit guar-
antee programs. 
(12) STATE PROGRAM.—The term ‘‘State pro-
gram’’ means a State capital access program or a 
State other credit support program. 
(13) 
SECRETARY.—The 
term 
‘‘Secretary’’ 
means the Secretary of the Treasury. 
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SEC. 3. FEDERAL FUNDS ALLOCATED TO STATES. 
(a) PROGRAM ESTABLISHED; PURPOSE.—There is 
established the State Small Business Credit Initiative 
(Program), to be administered by the Secretary. Under 
the Program, the Secretary shall allocate Federal funds 
to participating States and make the allocated funds avail-
able to the participating States as provided in this section 
for the uses described in this section. 
(b) ALLOCATION FORMULA.— 
(1) IN GENERAL.—Not later than 30 days after 
the date of enactment of this Act, the Secretary 
shall allocate Federal funds to participating States 
so that each State is eligible to receive an amount 
equal to the average of the respective amounts that 
the State— 
(A) would receive under the 2009 Alloca-
tion; and 
(B) would receive under the 2010 Alloca-
tion. 
(2) 2009 ALLOCATION FORMULA.— 
(A) IN GENERAL.—The Secretary shall de-
termine the 2009 Allocation by allocating Fed-
eral funds among the States in the proportion 
that each such State’s 2008 State employment 
decline bears to the aggregate of the 2008 
State employment declines for all States. 
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(B) MINIMUM
ALLOCATION.—The Sec-
retary shall adjust the allocations under sub-
paragraph (A) for each State to the extent nec-
essary to ensure that no State receives less than 
0.9 percent of the Federal funds. 
(C) 2008 STATE
EMPLOYMENT
DECLINE 
DEFINED.—For purposes of this paragraph and 
with respect to a State, the term ‘‘2008 State 
employment decline’’ means the excess (if any) 
of— 
(i) the number of individuals em-
ployed in such State determined for De-
cember 2007; over 
(ii) the number of individuals em-
ployed in such State determined for De-
cember 2008. 
(3) 2010 ALLOCATION FORMULA.— 
(A) IN GENERAL.—The Secretary shall de-
termine the 2010 Allocation by allocating Fed-
eral funds among the States in the proportion 
that each such State’s 2009 unemployment 
number bears to the aggregate of the 2009 un-
employment numbers for all of the States. 
(B) MINIMUM
ALLOCATION.—The Sec-
retary shall adjust the allocations under sub-
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paragraph (A) for each State to the extent nec-
essary to ensure that no State receives less than 
0.9 percent of the Federal funds. 
(C) 2009 UNEMPLOYMENT
NUMBER
DE-
FINED.—For purposes of this paragraph and 
with respect to a State, the term ‘‘2009 unem-
ployment number’’ means the number of indi-
viduals within such State who were determined 
to be unemployed by the Bureau of Labor Sta-
tistics for December 2009. 
(c) AVAILABILITY
OF ALLOCATED AMOUNT.—The 
amount allocated by the Secretary to each participating 
State under subsection (b) shall be made available to the 
State as follows: 
(1) ALLOCATED
AMOUNT
GENERALLY
TO
BE 
AVAILABLE TO STATE IN ONE-THIRDS.—Except as 
provided in paragraph (2)— 
(A) the Secretary shall apportion the par-
ticipating State’s allocated amount into one- 
thirds; 
(B) the Secretary shall transfer to the par-
ticipating State the first one-third when the 
Secretary approves the State for participation 
under section 4; and 
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(C) the Secretary shall transfer to the par-
ticipating State each successive one-third when 
the State has certified to the Secretary that it 
has expended, transferred, or obligated 80 per-
cent of the last transferred one-third for Fed-
eral contributions to, or for the account of, 
State programs. 
The Secretary may withhold the transfer of any suc-
cessive one-third pending results of a financial audit. 
(2) EXCEPTION.—The Secretary may, in the 
Secretary’s discretion, transfer the full amount of 
the participating State’s allocated amount to the 
State in a single transfer if the participating State 
applies to the Secretary for approval to use the full 
amount of the allocation as collateral for a quali-
fying loan or swap funding facility. 
(3) TRANSFERRED
AMOUNTS.—Each amount 
transferred to a participating State under this sec-
tion shall remain available to the State until used by 
the State as permitted under paragraph (4). 
(4) USE OF TRANSFERRED FUNDS.—Each par-
ticipating State may use funds transferred to it 
under this section only— 
(A) for making Federal contributions to, or 
for the account of, an approved State program; 
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(B) as collateral for a qualifying loan or 
swap funding facility; 
(C) in the case of the first one-third trans-
ferred, for paying administrative costs incurred 
by the State in implementing an approved State 
program in an amount not to exceed 5 percent 
of that first one-third; or 
(D) in the case of each successive one-third 
transferred, for paying administrative costs in-
curred by the State in implementing an ap-
proved State program in an amount not to ex-
ceed 3 percent of that successive one-third. 
(5) 
TERMINATION
OF
AVAILABILITY
OF 
AMOUNTS NOT TRANSFERRED WITHIN 2 YEARS OF 
PARTICIPATION.—Any portion of a participating 
State’s allocated amount that has not been trans-
ferred to the State under this section by the end of 
the 2-year period beginning on the date that the 
Secretary approves the State for participation may 
be deemed by the Secretary to be no longer allocated 
to the State and no longer available to the State and 
shall be returned to the General Fund. 
(6) DEFINITIONS.—For purposes of this sec-
tion— 
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sion to implement a State program and participate 
in the Program have been accomplished; 
(3) the State has filed an application with the 
Secretary for approval of a State capital access pro-
gram under section 5 or approval as a State other 
credit support program under section 6, in each case 
within the time period provided in the respective sec-
tion; and 
(4) the State and the Secretary have executed 
an allocation agreement that— 
(A) conforms to the requirements of this 
Act; 
(B) ensures that the State program com-
plies with such national standards as are estab-
lished by the Secretary under section 9(a)(2); 
(C) sets forth internal control, compliance, 
and reporting requirements as established by 
the Secretary, and such other terms and condi-
tions necessary to carry out the purposes of this 
Act, including an agreement by the State to 
allow the Secretary to audit State programs; 
(D) requires that the State program be 
fully positioned, within 90 days of the State’s 
execution of the allocation agreement with the 
Secretary, to act on providing the kind of credit 
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support that the State program was established 
to provide; and 
(E) includes an agreement by the State to 
deliver to the Secretary, and update annually, a 
schedule describing how the State intends to 
apportion among its State programs the Fed-
eral funds allocated to the State. 
(c) CONTRACTUAL ARRANGEMENTS FOR IMPLEMEN-
TATION OF STATE PROGRAMS.—A State may be approved 
to be a participating State, and be eligible for an allocation 
of Federal funds under the Program, if the State has con-
tractual arrangements for the implementation and admin-
istration of its State program with— 
(1) an existing, approved State program admin-
istered by another State; or 
(2) an authorized agent of, or entity supervised 
by, the State, including for-profit and not-for-profit 
entities. 
(d) SPECIAL PERMISSION.— 
(1) CIRCUMSTANCES
WHEN
A
MUNICIPALITY 
MAY APPLY DIRECTLY.—If a State does not, within 
60 days after the date of enactment of this Act, file 
with the Secretary a notice of its intent to apply for 
approval by the Secretary of a State program or 
within 9 months after the date of enactment of this 
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Act, file with the Secretary a complete application 
for approval of a State program, the Secretary may 
grant to municipalities of that State a special per-
mission that will allow them to apply directly to the 
Secretary without the State for approval to be par-
ticipating municipalities. 
(2) TIMING
REQUIREMENTS
APPLICABLE
TO 
MUNICIPALITIES
APPLYING
DIRECTLY.—To qualify 
for the special permission, a municipality of a State 
must, within 12 months after the date of enactment 
of this Act, file with the Secretary a complete appli-
cation for approval by the Secretary of a State pro-
gram. 
(3) NOTICES
OF
INTENT
AND
APPLICATIONS 
FROM MORE THAN 1 MUNICIPALITY.—A municipality 
of a State may combine with 1 or more other mu-
nicipalities of that State to file a joint notice of in-
tent to file and a joint application. 
(4) APPROVAL
CRITERIA.—The general ap-
proval criteria in paragraphs (2) and (4) of section 
4(b) will apply. 
(5) ALLOCATION TO MUNICIPALITIES.— 
(A) IF MORE THAN 3.—If more than 3 mu-
nicipalities, or combination of municipalities as 
provided in paragraph (3), of a State apply for 
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approval by the Secretary to be participating 
municipalities under this subsection, and the 
applications meet the approval criteria in para-
graph (4), the Secretary shall allocate Federal 
funds to the 3 municipalities with the largest 
populations. 
(B) IF 3 OR FEWER.—If 3 or fewer mu-
nicipalities, or combination of municipalities as 
provided in paragraph (3), of a State apply for 
approval by the Secretary to be participating 
municipalities under this subsection, and the 
applications meet the approval criteria in para-
graph (4), the Secretary shall allocate Federal 
funds to each applicant municipality or com-
bination of municipalities. 
(6) APPORTIONMENT OF ALLOCATED AMOUNT 
AMONG
PARTICIPATING
MUNICIPALITIES.—If the 
Secretary approves municipalities to be participating 
municipalities under this subsection, the Secretary 
shall apportion the full amount of the Federal funds 
that are allocated to that State to municipalities 
that are approved under this subsection in amounts 
proportionate to the population of those municipali-
ties, based on the most recent available decennial 
Census. 
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(7) APPROVING STATE PROGRAMS FOR MUNICI-
PALITIES.—If the Secretary approves municipalities 
to be participating municipalities under this sub-
section, the Secretary shall take into account the ad-
ditional considerations in section 6(d) in making the 
determination under section 5 or 6 that the State 
program or programs to be implemented by the par-
ticipating municipalities, including a State capital 
access program, is eligible for Federal contributions 
to, or for the account of, the State program. 
SEC. 5. APPROVING STATE CAPITAL ACCESS PROGRAMS. 
(a) APPLICATION.—A participating State that estab-
lishes a new, or has an existing, State capital access pro-
gram that meets the eligibility criteria in subsection (c) 
may apply to Secretary to have the State capital access 
program approved as eligible for Federal contributions to 
the reserve fund. 
(b) APPROVAL.—The Secretary shall approve such 
State capital access program as eligible for Federal con-
tributions to the reserve fund if— 
(1) within 60 days after the date of enactment 
of this Act, the State has filed with the Secretary a 
notice of intent to apply for approval by the Sec-
retary of a State capital access program; 
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(2) within 9 months after the date of enactment 
of this Act, the State has filed with the Secretary a 
complete application for approval by the Secretary of 
a capital access program; 
(3) the State satisfies the requirements of sub-
sections (a) and (b) of section 4; and 
(4) the State capital access program meets the 
eligibility criteria in subsection (c). 
(c) ELIGIBILITY CRITERIA FOR STATE CAPITAL AC-
CESS PROGRAMS.—For a State capital access program to 
be approved under this section, it must be a program of 
the State that— 
(1) provides portfolio insurance for business 
loans based on a separate loan-loss reserve fund for 
each financial institution; 
(2) requires insurance premiums to be paid by 
the financial institution lenders and by the business 
borrowers to the reserve fund to have their loans en-
rolled in the reserve fund; 
(3) provides for contributions to be made by the 
State 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 insti-
tution to the reserve fund for any newly enrolled 
loan; and 
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(4) provides its portfolio insurance solely for 
loans that meet the following requirements: 
(A) the borrower has 500 employees or less 
at the time that the loan is enrolled in the Pro-
gram; and 
(B) the loan amount does not exceed 
$5,000,000. 
(d) FEDERAL CONTRIBUTIONS TO APPROVED STATE 
CAPITAL ACCESS PROGRAMS.—A State capital access pro-
gram approved under this section will be eligible for receiv-
ing Federal contributions to the reserve fund in an 
amount equal to the sum of the amount of the insurance 
premium charges paid by the borrowers and by the finan-
cial institution to the reserve fund for loans that meet the 
requirements in subsection (c)(4). A participating State 
may use the Federal contribution to make its contribution 
to the reserve fund of an approved State capital access 
program. 
(e) MINIMUM PROGRAM REQUIREMENTS FOR STATE 
CAPITAL ACCESS PROGRAMS.—The Secretary shall, by 
regulation or other guidance, prescribe Program require-
ments that meet the following minimum requirements. 
(1) EXPERIENCE AND CAPACITY.—The partici-
pating State shall determine for each financial insti-
tution that participates in the State capital access 
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program, after consultation with the appropriate 
Federal banking agency or, in the case of a financial 
institution that is a non-depository community devel-
opment financial institution, the Community Devel-
opment Financial Institution Fund, that the finan-
cial institution has sufficient commercial lending ex-
perience and financial and managerial capacity to 
participate in the approved State capital access pro-
gram. The determination by the State shall not be 
reviewable by the Secretary. 
(2) INVESTMENT AUTHORITY.—Subject to ap-
plicable State law, the participating State may in-
vest, or cause to be invested, funds held in a reserve 
fund by establishing a deposit account at the finan-
cial institution lender in the name of the partici-
pating State. In the event that funds in the reserve 
fund are not deposited in such an account, such 
funds shall be invested in a form that the partici-
pating State determines is safe and liquid. 
(3) LOAN TERMS AND CONDITIONS TO BE DE-
TERMINED BY AGREEMENT.—A loan to be filed for 
enrollment in an approved State capital access pro-
gram may be made with such interest rate, fees, and 
other terms and conditions, and the loan may be en-
rolled in the approved State capital access program 
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and claims may be filed and paid, as agreed upon 
by the financial institution lender and the borrower, 
consistent with applicable law. 
(4) LENDER CAPITAL AT-RISK.—A loan to be 
filed for enrollment in the State capital access pro-
gram must require the financial institution lender to 
have a meaningful amount of its own capital re-
sources at risk in the loan. 
(5) PREMIUM
CHARGES
MINIMUM
AND
MAX-
IMUM AMOUNTS.—The insurance premium charges 
payable to the reserve fund by the borrower and the 
financial institution lender shall be prescribed by the 
financial institution lender, within minimum and 
maximum limits that require that the sum of the in-
surance premium charges paid in connection with a 
loan by the borrower and the financial institution 
lender may not be less than 2 percent nor more than 
7 percent of the amount of the loan enrolled in the 
approved State capital access program. 
(6) STATE
CONTRIBUTIONS.—In enrolling a 
loan in an approved State capital access program, 
the participating State may make a contribution to 
the reserve fund to supplement Federal contribu-
tions made under this Program. 
(7) LOAN PURPOSE.— 
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(A) PARTICULAR LOAN PURPOSE REQUIRE-
MENTS
AND
PROHIBITIONS.—In connection 
with the filing of a loan for enrollment in an 
approved State capital access program, the fi-
nancial institution lender— 
(i) shall obtain an assurance from 
each borrower that— 
(I) the proceeds of the loan will 
be used for a business purpose; 
(II) the loan will not be used to 
finance such business activities as the 
Secretary, by regulation, may pro-
scribe as prohibited loan purposes for 
enrollment in an approved State cap-
ital access program; and 
(III) the borrower is not— 
(aa) an executive officer, di-
rector, or principal shareholder of 
the financial institution lender; 
(bb) a member of the imme-
diate family of an executive offi-
cer, director, or principal share-
holder of the financial institution 
lender; or 
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(cc) a related interest of any 
such executive officer, director, 
principal shareholder, or member 
of the immediate family; 
(ii) shall provide assurances to the 
participating State that the loan has not 
been made in order to place under the pro-
tection of the approved State capital access 
program prior debt that is not covered 
under the approved State capital access 
program and that is or was owed by the 
borrower to the financial institution lender 
or to an affiliate of the financial institution 
lender; 
(iii) shall not allow the enrollment of 
a loan to a borrower that is a refinancing 
of a loan previously made to that borrower 
by the financial institution lender or an af-
filiate of the financial institution lender; 
and 
(iv) may include additional restric-
tions on the eligibility of loans or bor-
rowers that are not inconsistent with the 
provisions and purposes of this Act, includ-
ing compliance with all applicable Federal 
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and State laws, regulations, ordinances, 
and Executive orders. 
(B) DEFINITIONS.—For purposes of this 
subsection, the terms ‘‘executive officer’’, ‘‘di-
rector’’, ‘‘principal shareholder’’, ‘‘immediate 
family’’, and related interest refer to the same 
relationship to a financial institution lender as 
the relationship described in part 215 of title 
12 of the Code of Federal Regulations, or any 
successor to such part. 
SEC. 6. APPROVING COLLATERAL SUPPORT AND OTHER IN-
NOVATIVE CREDIT ACCESS AND GUARANTEE 
INITIATIVES FOR SMALL BUSINESSES AND 
MANUFACTURERS. 
(a) APPLICATION.—A participating State that estab-
lishes a new, or has an existing, credit support program 
that meets the eligibility criteria in subsection (c) may 
apply to the Secretary to have the State other credit sup-
port program approved as eligible for Federal contribu-
tions to, or for the account of, the State program. 
(b) APPROVAL.—The Secretary shall approve such 
State other credit support program as eligible for Federal 
contributions to, or for the account of, the program if— 
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(1) the Secretary determines that the State sat-
isfies the requirements of paragraphs (1) through 
(3) of subsection 5(b); 
(2) the Secretary determines that the State 
other credit support program meets the eligibility 
criteria in subsection (c); 
(3) the Secretary determines the State other 
credit support program to be eligible based on the 
additional considerations in subsection (d); and 
(4) within 9 months after the date of enactment 
of this Act, the State has filed with Treasury a com-
plete application for Treasury approval. 
(c) ELIGIBILITY CRITERIA FOR STATE OTHER CRED-
IT SUPPORT PROGRAMS.—For a State other credit sup-
port program to be approved under this section, it must 
be a program of the State that— 
(1) can demonstrate that, at a minimum, 1 dol-
lar of public investment by the State program will 
cause and result in 1 dollar of new private credit; 
(2) can demonstrate a reasonable expectation 
that, when considered with all other State programs 
of the State, such State programs together have the 
ability to use amounts of new Federal contributions 
to, or for the account of, all such programs in the 
State to cause and result in amounts of new small 
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business lending at least 10 times the new Federal 
contribution amount; 
(3) for those State other credit support pro-
grams that provide their credit support through 1 or 
more financial institution lenders, requires the finan-
cial institution lenders to have a meaningful amount 
of their own capital resources at risk in their small 
business lending; and 
(4) extends credit support that meets the fol-
lowing requirements: 
(A) targets an average borrower size of 
500 employees or less; 
(B) does not extend credit support to bor-
rowers that have more than 750 employees; 
(C) targets support towards loans with an 
average principal amount of $5,000,000 or less; 
and 
(D) does not extend credit support to loans 
that exceed a principal amount of $20,000,000. 
(d) ADDITIONAL CONSIDERATIONS.—In making a de-
termination that a State other credit support program is 
eligible for Federal contributions to, or for the account 
of, the State program, the Secretary shall take into ac-
count the following additional considerations: 
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(1) the anticipated benefits to the State, its 
businesses, and its residents to be derived from the 
Federal contributions to, or for the account of, the 
approved State other credit support program, includ-
ing the extent to which resulting small business 
lending will expand economic opportunities; 
(2) the operational capacity, skills, and experi-
ence of the management team of the State other 
credit support program; 
(3) the capacity of the State other credit sup-
port program to manage increases in the volume of 
its small business lending; 
(4) the internal accounting and administrative 
controls systems of the State other credit support 
program, and the extent to which they can provide 
reasonable assurance that funds of the State pro-
gram are safeguarded against waste, loss, unauthor-
ized use, or misappropriation; and 
(5) the soundness of the program design and 
implementation plan of the State other credit sup-
port program. 
(e) FEDERAL CONTRIBUTIONS TO APPROVED STATE 
OTHER CREDIT SUPPORT PROGRAMS.—A State other 
credit support program approved under this section will 
be eligible for receiving Federal contributions to, or for 
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the account of, the State program in an amount consistent 
with the schedule describing the apportionment of allo-
cated Federal funds among State programs delivered by 
the State to the Secretary under the allocation agreement. 
(f) MINIMUM PROGRAM REQUIREMENTS FOR STATE 
OTHER CREDIT SUPPORT PROGRAMS.— 
(1) FUND TO PRESCRIBE.—The Secretary shall, 
by regulation or other guidance, prescribe Program 
requirements for approved State other credit support 
programs. 
(2) CONSIDERATIONS
FOR
FUND.—In pre-
scribing minimum Program requirements for ap-
proved State other credit support programs, the Sec-
retary shall take into consideration, to the extent the 
Secretary determines applicable and appropriate, the 
minimum Program requirements for approved State 
capital access programs in section 5(e). 
SEC. 7. REPORTS. 
(a) QUARTERLY USE-OF-FUNDS REPORT.— 
(1) IN GENERAL.—Not later than 30 days after 
the beginning of each calendar quarter, beginning 
after the first full calendar quarter to occur after 
the date the Secretary approves a State for partici-
pation, the participating State shall submit to the 
Secretary a report on the use of Federal funding by 
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the participating State during the previous calendar 
quarter. 
(2) REPORT CONTENTS.—The report shall— 
(A) indicate the total amount of Federal 
funding used by the participating State; 
(B) include a certification by the partici-
pating State that— 
(i) the information provided in accord-
ance with subparagraph (A) is accurate; 
(ii) funds continue to be available and 
legally committed to contributions by the 
State to, or for the account of, approved 
State programs, less any amount that has 
been contributed by the State to, or for the 
account of, approved State programs sub-
sequent to the State being approved for 
participation in the Program; and 
(iii) the participating State is imple-
menting its approved State program or 
programs in accordance with this Act and 
regulations issued pursuant to section 10. 
(b) ANNUAL REPORT.—Not later than March 31 of 
each year, beginning March 31, 2011, each participating 
State shall submit to the Secretary an annual report that 
shall include the following information: 
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(1) The number of borrowers that received new 
loans originated under the approved State program 
or programs after the State program was approved 
as eligible for Federal contributions. 
(2) The total amount of such new loans. 
(3) Breakdowns by industry type, loan size, an-
nual sales, and number of employees of the bor-
rowers that received such new loans. 
(4) The zip code of each borrower that received 
such a new loan. 
(5) Such other data that the Secretary, in the 
Secretary’s sole discretion, may require to carry out 
the purposes of the Program. 
(c) FORM.—The reports and data filed pursuant to 
subsections (a) and (b) shall be in such form as the Sec-
retary, in the Secretary’s sole discretion, may require. 
(d) 
TERMINATION
OF
REPORTING
REQUIRE-
MENTS.—The requirement to submit reports under sub-
sections (a) and (b) shall terminate for a participating 
State with the submission of the completed reports due 
on the first March 31 to occur after 5 complete 12-month 
periods after the State is approved by the Secretary to 
be a participating State. 
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SEC. 8. REMEDIES FOR STATE PROGRAM TERMINATION OR 
FAILURES. 
(a) REMEDIES.— 
(1) IN GENERAL.—If any of the events listed in 
paragraph (2) occur, the Secretary, in the Sec-
retary’s discretion, may— 
(A) reduce the amount of Federal funds al-
located to the State under the Program; or 
(B) terminate any further transfers of allo-
cated amounts that have not yet been trans-
ferred to the State. 
(2) CAUSAL EVENTS.—The events referred to in 
paragraph (1) are— 
(A) termination by a participating State of 
its participation in the Program; 
(B) failure on the part of a participating 
State to submit complete reports under section 
7 on a timely basis; or 
(C) noncompliance by the State with the 
terms of the allocation agreement between the 
Secretary and the State. 
(b) DE-ALLOCATED AMOUNTS TO BE RE-ALLO-
CATED.—If, after 13 months, any portion of the amount 
of Federal funds allocated to a participating State is 
deemed by the Secretary to be no longer allocated to the 
State after actions taken by the Secretary under sub-
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