A few suggestions for the average, financially strapped print provider.
To be eligible for funding, a state CAP is required to: provide portfolio insurance for business loans based upon a separate loan-loss reserve fund for each financial institution; require insurance premiums to be paid by the financial institution lenders and by the business borrowers to the reserve fund to have their loans enrolled in the reserve fund; provide 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 paid by the borrower and the financial institution to the reserve fund for any newly enrolled loan; and provide portfolio insurance solely for loans not exceeding $5 million to borrowers with 500 or fewer employees.
For other types of credit-support programs, a state must demonstrate that: $1 of public support will result in $1 of new private credit; and individual guarantees will be limited to loans not greater than $20 million and borrowers with 750 or fewer employees.
On average, the program will target borrowers with 500 or fewer employees and loans with an average principal amount of $5 million or less. In addition, states must show that, taken together, its CAP and other credit support programs will result in $10 of new small business lending for each $1 in federal funds.
If a state does not have an existing small-business capital access or other credit support program, the state can establish one in order to obtain SSBCI funding. If a state did not file the require notice of intent or fails to meet the June 2011 deadline, municipalities within the state may apply for the pro-rata share of the state’s allocation – provided the municipality can meet all of the program’s criteria. Up to three municipalities within a state may be eligible to receive SSBCI funds.
Successfully opening the funding spigot
The US Department of the Treasury recently announced that the states of Michigan and North Carolina were the first to receive SSBCI funds. These funds will, as the Treasury announced, strengthen the states’ existing programs that leverage private lending to help finance small business and manufacturers that are creditworthy but who are not getting the loans they need to expand and create jobs.
Under SSBCI, all 50 states, the District of Columbia, and the US territories are offered the opportunity to apply for funds for programs that partner with private lenders to extend greater credit to small businesses. States are required to demonstrate minimum “bang for the buck,” of $10 in new private lending for every $1 in federal funding. Accordingly, the $1.5 billion funding commitment that the federal government will make for this program is expected to support $15 billion in additional private lending.
Mark E. Battersby is a freelance writer who has specialized in taxes and finance for the last 25 years. He currently writes for publications in a variety of fields, syndicates two weekly columns that appear in more than 65 publications, and has written four books.