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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 qualifying loan or swap fund-
ing facility. 
(2) TRANSFERRED
AMOUNTS.—Each amount 
transferred to a participating State under this section 
shall remain available to the State until used by the 
State as permitted under paragraph (3). 
(3) 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; 
(B) as collateral for a qualifying loan or 
swap funding facility; 
(C) in the case of the first 1⁄3 transferred, 
for paying administrative costs incurred by the 
State in implementing an approved State pro-
gram in an amount not to exceed 5 percent of 
that first 1⁄3; or 
(D) in the case of each successive 1⁄3 trans-
ferred, for paying administrative costs incurred 
by the State in implementing an approved State
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program in an amount not to exceed 3 percent 
of that successive 1⁄3. 
(4) TERMINATION OF AVAILABILITY OF AMOUNTS 
NOT TRANSFERRED WITHIN 2 YEARS OF PARTICIPA-
TION.—Any portion of a participating State’s allo-
cated amount that has not been transferred to the 
State under this section by the end of the 2-year pe-
riod beginning on the date that the Secretary ap-
proves 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 re-
turned to the General Fund of the Treasury. 
(5) TRANSFERRED AMOUNTS NOT ASSISTANCE.— 
The amounts transferred to a participating State 
under this section shall not be considered assistance 
for purposes of subtitle V of title 31, United States 
Code. 
(6) DEFINITIONS.—In this section— 
(A) the term ‘‘allocated amount’’ means the 
total amount of Federal funds allocated by the 
Secretary under subsection (b) to the partici-
pating State; and 
(B) the term ‘‘1⁄3’’ means— 
(i) in the case of the first 1⁄3 and sec-
ond 1⁄3, an amount equal to 33 percent of
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a participating State’s allocated amount; 
and 
(ii) in the case of the last 1⁄3, an 
amount equal to 34 percent of a partici-
pating State’s allocated amount. 
SEC. 3004. APPROVING STATES FOR PARTICIPATION. 
(a) APPLICATION.—Any State may apply to the Sec-
retary for approval to be a participating State under the 
Program and to be eligible for an allocation of Federal 
funds under the Program. 
(b) GENERAL APPROVAL CRITERIA.—The Secretary 
shall approve a State to be a participating State, if— 
(1) a specific department, agency, or political 
subdivision of the State has been designated to imple-
ment a State program and participate in the Pro-
gram; 
(2) all legal actions necessary to enable such des-
ignated department, agency, or political subdivision 
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 3005 or approval as a State other 
credit support program under section 3006, in each
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case within the time period provided in the respective 
section; and 
(4) the State and the Secretary have executed an 
allocation agreement that— 
(A) conforms to the requirements of this 
title; 
(B) ensures that the State program complies 
with such national standards as are established 
by the Secretary under section 3009(a)(2); 
(C) sets forth internal control, compliance, 
and reporting requirements as established by the 
Secretary, and such other terms and conditions 
necessary to carry out the purposes of this title, 
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 execu-
tion of the allocation agreement with the Sec-
retary, to act on providing the kind of credit 
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 ap-
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portion among its State programs the Federal 
funds allocated to the State. 
(c) CONTRACTUAL ARRANGEMENTS FOR IMPLEMENTA-
TION 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 ap-
proval by the Secretary of a State program or within 
9 months after the date of enactment of this Act, file 
with the Secretary a complete application for ap-
proval of a State program, the Secretary may grant 
to municipalities of that State a special permission 
that will allow them to apply directly to the Sec-
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retary without the State for approval to be partici-
pating municipalities. 
(2) TIMING REQUIREMENTS APPLICABLE TO MU-
NICIPALITIES
APPLYING
DIRECTLY.—To qualify for 
the special permission, a municipality of a State 
shall be required, within 12 months after the date of 
enactment of this Act, to file with the Secretary a 
complete application for approval by the Secretary of 
a State program. 
(3) NOTICES
OF
INTENT
AND
APPLICATIONS 
FROM MORE THAN 1 MUNICIPALITY.—A municipality 
of a State may combine with 1 or more other munici-
palities of that State to file a joint notice of intent 
to file and a joint application. 
(4) APPROVAL CRITERIA.—The general approval 
criteria in paragraphs (2) and (4) shall 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 
approval by the Secretary to be participating 
municipalities under this subsection, and the ap-
plications meet the approval criteria in para-
graph (4), the Secretary shall allocate Federal
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funds to the 3 municipalities with the largest 
populations. 
(B) IF 3 OR FEWER.—If 3 or fewer munici-
palities, 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 ap-
plications 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 Sec-
retary 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 pro-
portionate to the population of those municipalities, 
based on the most recent available decennial census. 
(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 3006(d) in making
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the determination under section 3005 or 3006 that the 
State program or programs to be implemented by the 
participating municipalities, including a State cap-
ital access program, is eligible for Federal contribu-
tions to, or for the account of, the State program. 
SEC. 3005. 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; 
(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 3004; and
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(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, that program shall be re-
quired to 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 
(4) provides its portfolio insurance solely for 
loans that meet both the following requirements: 
(A) The borrower has 500 employees or less 
at the time that the loan is enrolled in the Pro-
gram.
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(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 financial institu-
tion to the reserve fund for loans that meet the requirements 
in subsection (c)(4). A participating State may use the Fed-
eral 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 reg-
ulation or other guidance, prescribe Program requirements 
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 
program, after consultation with the appropriate Fed-
eral banking agency or, in the case of a financial in-
stitution that is a nondepository community develop-
ment financial institution, the Community Develop-
ment Financial Institution Fund, that the financial 
institution has sufficient commercial lending experi-