The Small Business Jobs Act of 2010 (the act) aims to address the ongoing effects of the 2007-2009 financial crisis on small businesses and stimulate job growth by establishing the SSBCI program, among other things. SSBCI is designed to strengthen state programs that support private financing to small businesses and small manufacturers that, according to Treasury, are not getting the loans or investments they need to expand and to create jobs. The act did not require a specific number of jobs to be created or retained as a result of SSBCI funds. The act appropriated $1.5 billion to be used by Treasury to provide direct support to states for use in programs designed to increase access to credit for small businesses. Using a formula contained in the act, Treasury calculated the amount of SSBCI funding for which each of the 50 states, as well as the District of Columbia, the Commonwealth of Puerto Rico, the Commonwealth of the Northern Mariana Islands, Guam, American Samoa, and the United States Virgin Islands were eligible to apply. This formula takes into account a state’s job losses in proportion to the aggregate job losses of all states. (See app. III for more information on available funding by location). In addition to states, the act granted permission to municipalities to apply directly for funding under SSBCI in the event that a state either failed to file a Notice of Intent to Apply for its allocation of program funds by November 26, 2010, or, after filing a Notice of Intent, failed to submit an application to Treasury by June 27, 2011. Treasury officials stated that municipalities granted permission to submit an application for program funds were generally subject to the same approval criteria and program requirements as states. Municipalities were eligible to apply for up to the total amount of their state’s SSBCI allocation, but the final approved amounts were to be apportioned based on their pro rata share by population of all applicants. Figure 1 provides a timeline of major SSBCI milestones. The act allowed Treasury to provide SSBCI funding for two state program categories: capital access programs (CAP) and other credit support programs (OCSP). A CAP is a loan portfolio insurance program wherein the borrower and lender, such as a small business owner and a bank, contribute to a reserve fund held by the lender. Under the act, approved CAPs are eligible to receive federal contributions to the reserve funds held by each participating financial institution in an amount equal to the total amount of the insurance premiums paid by the borrower and the lender on a loan-by-loan basis. Amounts in the lender’s reserve fund are then available to cover any losses incurred in its portfolio of CAP loans. For an SSBCI loan to be eligible for enrollment in a state’s approved CAP, the borrower must have 500 or fewer employees and the loan amount cannot exceed $5 million. In addition, the following types of OCSPs are eligible to receive SSBCI funds under the act: Collateral support programs: These programs supply cash collateral accounts to lenders to enhance the collateral coverage of borrowers. The accounts will cover all or a portion of the collateral shortfall identified by a lending institution. These programs can be designed to target certain regions or industries, such as equipment lending, in which a lender may be willing to fund at 80 percent loan-to-value, but a borrower may not be able to bridge the difference in cash at closing. Loan participation programs: These programs enable small businesses to obtain medium- to long-term financing, usually in the form of term loans, to help them expand their businesses. States may structure a loan participation program in two ways: (1) purchase transactions, also known as purchase participation, in which the state purchases a portion of a loan originated by a lender and (2) companion loans, also known as co-lending participation or parallel loans, in which a lender originates one loan and the state originates a second (usually subordinate) loan to the same borrower. This program enables the state to act as a lender, in partnership with a financial institution, to provide small business loans at attractive terms. Direct loan programs: Although Treasury does not consider these programs to be a separate SSBCI program type, it acknowledges that some states may identify programs that they plan to support with SSBCI funds as direct loan programs. The programs that some states label as direct loan programs are viewed by Treasury as co-lending programs categorized as loan participation programs, which have lending structures that are allowable under the statute. Loan guarantee programs: These programs enable small businesses to obtain term loans or lines of credit to help them grow and expand their businesses by providing a lender with the necessary security, in the form of a partial guarantee, for them to approve a loan or line of credit. In most cases, a state sets aside funds in a dedicated reserve or account to guarantee a specified percentage of each approved loan. Venture capital programs: These programs provide investment capital to create and grow start-ups and early-stage businesses, often in one of two forms: (1) a state-run venture capital fund (which may include other private investors) that invests directly in businesses or (2) a fund of funds, which is a fund that invests in other venture capital funds that in turn invest in individual businesses. Many factors, particularly resources and available talent, inform a state’s decision on which form to choose. For example, a state may choose to invest in a large venture fund that agrees to reinvest in that state an amount equal to that invested by the state, as opposed to trying to attract that same talent to a smaller fund capitalized with state money. Qualified loan or swap funding facilities: States may enter into qualifying loan or swap funding transactions under which SSBCI funds are pledged as collateral for private loans or credit lines. The private financing proceeds must, however, be used exclusively for the reserve or other accounts that back the credit support obligations of a borrowing CAP or OCSP. Presumably, fees paid by borrowers and lenders will provide a return to the providers of private capital. Other OCSPs: States were also able to submit an application to Treasury outlining their plans to support OCSPs that, though not able to be categorized in any of the above OCSP types, feature combinations of aspects of these eligible types. OCSPs approved to receive SSBCI funds are required to target borrowers with an average size of 500 or fewer employees and to target support towards loans with average principal amounts of $5 million or less. In addition, these programs cannot lend to borrowers with more than 750 employees or make any loans in excess of $20 million. In applying for funding, applicants had to demonstrate that their CAPs and OCSPs could satisfy SSBCI criteria. For example, applicant states had to demonstrate that all legal actions had been taken at the state level to accept SSBCI funds and implement the state programs. States were also required to demonstrate that the state possessed the operational capacity, skills, and financial and management capacity to meet the objectives set forth in the act. In addition, each applicant was required to demonstrate a “reasonable expectation” that its participating programs, taken together, would generate an amount of private financing and investment at least 10 times its SSBCI funding (that is, a leverage ratio of 10:1) by the program’s end in December 2016. Furthermore, each application had to include a report detailing how the state would use its SSBCI allocation to provide access to capital for small businesses in low- and moderate-income, minority, and other underserved communities, including women- and minority-owned small businesses. The act requires that each state receive its SSBCI funds in three disbursements of approximately one-third of its approved allocation. Prior to receipt of the second and third disbursements, a state must certify that it has expended, transferred, or obligated 80 percent or more of the previous disbursement to or for the account of one or more approved state programs. Treasury may terminate any portion of a state’s allocation that Treasury has not yet disbursed within 2 years of the date on which its SSBCI Allocation Agreement was signed. Treasury may also terminate, reduce, or withhold a state’s allocation at any time during the term of the Allocation Agreement upon an event of default under the agreement. Following the execution of the Allocation Agreement, states are required All to submit quarterly and annual reports on their use of SSBCI funds. SSBCI Allocation Agreements, the primary tool signed by Treasury and each participating state, which outline how recipients are to comply with program requirements, will expire on March 31, 2017. The program’s reporting requirements are detailed in section 4.8 of the SSBCI allocation agreement. The obligations of participating states and territories to perform and report on progress will expire as outlined in the terms of the agreement. Nearly all of the states eligible for SSBCI funds submitted applications to Treasury. Fifty-four of the 56 states and territories that were eligible to apply for program funds submitted an application prior to the June 27, 2011, deadline, although one state later withdrew its application. In total, states requested more than $1.4 billion in SSBCI funds—95 percent of the program’s appropriation—and only one applied for less than its maximum allocation. Following the application deadline for states, Treasury received five additional applications from municipalities in three states—Alaska, North Dakota, and Wyoming—by the September 27, 2011, deadline requesting a total of $39.5 million in program funds. Figure 2 illustrates the distribution of SSBCI funds applied for by states and territories. Participating states indicated that they are planning to support various new, existing, and dormant (that is, previously suspended) lending programs with their respective SSBCI allocations.