The Small Business Lending Fund
Robert Jay Dilger
Senior Specialist in American National Government
December 19, 2013
Congressional Research Service
7-5700
www.crs.gov
R42045


The Small Business Lending Fund

Summary
Congressional interest in small business access to capital has increased in recent years because of
concerns that small businesses might be prevented from accessing sufficient capital to enable
them to assist in the economic recovery. Some, including President Obama, have argued that the
federal government should provide additional resources to assist small businesses in acquiring
capital necessary to start, continue, or expand operations and create jobs. Others worry about the
long-term adverse economic effects of spending programs that increase the federal deficit. They
advocate business tax reduction, reform of financial credit market regulation, and federal fiscal
restraint as the best means to assist small businesses and create jobs.
Several laws were enacted during the 111th Congress to enhance small business access to capital.
For example, P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (ARRA),
provided the Small Business Administration (SBA) an additional $730 million, including funding
to temporarily subsidize SBA fees and increase the 7(a) loan guaranty program’s maximum loan
guaranty percentage to 90%. P.L. 111-240, the Small Business Jobs Act of 2010, authorized the
Secretary of the Treasury to establish a $30 billion Small Business Lending Fund (SBLF) ($4.0
billion was issued) to encourage community banks with less than $10 billion in assets to increase
their lending to small businesses, a $1.5 billion State Small Business Credit Initiative to provide
funding to participating states with small business capital access programs, numerous changes to
the SBA’s loan guaranty and contracting programs, funding to continue the SBA’s fee subsidies
and the 7(a) program’s 90% maximum loan guaranty percentage through December 31, 2010, and
about $12 billion in tax relief for small businesses. P.L. 111-322, the Continuing Appropriations
and Surface Transportation Extensions Act, 2011, authorized the SBA to continue its fee subsidies
and the 7(a) program’s 90% maximum loan guaranty percentage through March 4, 2011, or until
available funding was exhausted, which occurred on January 3, 2011.
This report focuses on the SBLF. It opens with a discussion of the supply and demand for small
business loans. The SBLF’s advocates argued that the SBLF was needed to enhance the supply of
small business loans. The report then examines other arguments which were presented both for
and against the program. Advocates argued that the SBLF would increase lending to small
businesses and, in turn, create jobs. Opponents argued that the SBLF could lose money, lacked
sufficient oversight provisions, did not require lenders to increase their lending to small
businesses, could serve as a vehicle for TARP recipients to effectively refinance their TARP loans
on more favorable terms with little or any resulting benefit for small businesses, and could
encourage a failing lender to make even riskier loans to avoid higher dividend payments.
The report concludes with an examination of the program’s implementation and a discussion of
bills introduced during the 112th and 113th Congresses to amend the SBLF. For example, during
the 112th Congress, S. 681, the Greater Accountability in the Lending Fund Act of 2011, would
have limited the program’s authority to 15 years from enactment and prohibited TARP recipients
from participating in the program. H.R. 2807, the Small Business Leg-Up Act of 2011, would
have transferred any unobligated and repaid funds from the SBLF to the Community
Development Financial Institutions Fund “to increase the availability of credit for small
businesses.” H.R. 3147, the Small Business Lending Extension Act, would have extended the
Treasury Department’s investment authority from one year to two years. During the 113th
Congress, H.R. 2474, the Community Lending and Small Business Jobs Act of 2013, would
transfer any unobligated and repaid funds from the SBLF to the Community Development
Financial Institutions Fund.
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Contents
Small Business Access to Capital .................................................................................................... 1
Three Indicators of the Supply and Demand for Small Business Loans ......................................... 3
Federal Reserve Board: Survey of Senior Loan Officers .......................................................... 3
Federal Deposit Insurance Corporation: Outstanding Loan Balance ........................................ 4
Federal Reserve Board: Survey of Commercial Banks ............................................................. 5
Factors that May Have Contributed to the Decline in the Supply of Small Business
Loans in 2007-2010 ................................................................................................................ 7
Factors that May Have Contributed to the Decline in the Demand for Small Business
Loans in 2007-2010 ................................................................................................................ 8
The Congressional Response to the Decline in the Supply and Demand for Small
Business Loans ....................................................................................................................... 9
The SBLF....................................................................................................................................... 11
Arguments For and Against the SBLF ........................................................................................... 13
The SBLF’s Implementation .......................................................................................................... 17
Treasury’s Rollout of the Program .......................................................................................... 17
Small Business Lending Progress Reports .............................................................................. 20
Proposed Legislation ..................................................................................................................... 23
Concluding Observations ............................................................................................................... 25

Figures
Figure 1. Small Business Lending Environment, 2000-2013 .......................................................... 4
Figure 2. Outstanding Small Business Loans, Non-Agricultural Purposes, 2005-2013 .................. 5
Figure 3. Estimated Value of Commercial and Industrial Loans Made By Commercial
Banks on a Quarterly Basis, 2005-2013 ....................................................................................... 6
Figure 4. Estimated Value of Commercial and Industrial Loans Made By Commercial
Banks in Amounts Under $1 Million, on a Quarterly Basis, 2005-2013 ...................................... 7

Tables
Table 1. Small Business Lending Increases and Dividend Rates Under the SBLF ....................... 12
Table A-1. Small Business Lending Increases and Dividend Rates Under the
House-Passed Version of H.R. 5297 ........................................................................................... 30

Appendixes
Appendix. The SBLF’s Legislative History ................................................................................... 28

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Contacts
Author Contact Information........................................................................................................... 33

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Small Business Access to Capital
Congressional interest in small business access to capital has increased in recent years because of
concerns that small businesses might be prevented from accessing sufficient capital to enable
them to assist in the economic recovery.1 Small businesses, defined as having fewer than 500
employees, have played an important role in net job growth during previous economic recoveries,
particularly in the construction, housing, and retail sectors.2 For example, after the eight-month
recession that began in July 1990 and ended in March 1991, small businesses increased their net
employment in the first year after the recession, while larger businesses continued to experience
declines in employment.3
During the most recent recession (December 2007-June 2009), small businesses accounted for
almost 60% of net job losses.4 Following the recession, small businesses continued to lose jobs
for three consecutive quarters at a higher rate than large businesses (964,000 fewer jobs compared
with 516,000 fewer jobs).5 Since then, small businesses have been adding jobs more rapidly than
larger businesses (3.3 million additional jobs compared with 1.7 million additional jobs from June
30, 2010, through September 30, 2012), but unemployment rates remain relatively high.6
Some, including President Obama, have argued that the federal government should provide
additional resources to assist small businesses in acquiring capital necessary to start, continue, or
expand operations and create jobs. Others worry about the long-term adverse economic effects of
spending programs that increase the federal deficit. They advocate business tax reduction, reform

1 The United States does not have a statutory definition for medium-sized or large businesses. A business concern can
either be considered “small” or not small under §3(a)(1) of the Small Business Act, 15 U.S.C. §632(a)(1), which
indicates that a small business concern “shall be deemed to be one that is independently owned and operated and which
is not dominant in its field of operation.” The Small Business Administration has established two widely used size
standards—500 employees for most manufacturing and mining industries and $7.0 million in average annual receipts
for most nonmanufacturing industries. However, many exceptions exist. For example, a small business concern can
have up to 1,500 employees for certain industry categories. The SBA’s size standards may be found at 13 C.F.R.
§121.201. For additional information and analysis, see CRS Report R40860, Small Business Size Standards: A
Historical Analysis of Contemporary Issues
, by Robert Jay Dilger. In contrast, the European Union defines small
business as those with fewer than 50 employees, medium-sized business as those employing 50 to 250 workers, and
large businesses as those with over 250 employees. See European Commission, “Small and Medium Sized Enterprises:
What is an SME?” at http://ec.europa.eu/enterprise/policies/sme/facts-figures-analysis/sme-definition/index_en.htm.
2 Brian Headd, “Small Businesses Most Likely to Lead Economic Recovery,” The Small Business Advocate, vol. 28,
no. 6 (July 2009), pp. 1, 2.
3 U.S. Small Business Administration, Office of Advocacy, “Small Business Economic Indicators for 2003: A
reference guide to the latest data on small business activity, including state and industry data,” August 2004, p. 3, at
http://archive.sba.gov/advo/stats/sbei03.pdf.
4 U.S. Small Business Administration, “The Small Business Economy, 2010: A Report to the President,” pp. 2, 5, 21,
22, at http://www.sba.gov/sites/default/files/sb_econ2010.pdf; and U.S. Small Business Administration, Fiscal Year
2010 Congressional Budget Justification
, p. 1, at http://www.sba.gov/sites/default/files/
Congressional_Budget_Justification_2010.pdf.
5 U.S. Small Business Administration, Office of Advocacy, “Small Business Quarterly Bulletin: Third Quarter 2011,”
at http://www.sba.gov/sites/default/files/SBQB_2011q3.pdf.
6 U.S. Small Business Administration, Office of Advocacy, “Small Business Quarterly Bulletin: Third Quarter 2012,”
at http://www.sba.gov/sites/default/files/files/SBQB_2012q3.pdf; and U.S. Small Business Administration, Office of
Advocacy, “Small Business Quarterly Bulletin: First Quarter 2013,” at http://www.sba.gov/sites/default/files/files/
SBQB_2013q1.pdf.
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of financial credit market regulation, and federal fiscal restraint as the best means to assist small
businesses and create jobs.
Several laws were enacted during the 111th Congress to enhance small business access to capital.
For example,
• P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (ARRA),
provided the Small Business Administration (SBA) an additional $730 million,
including $375 million to temporarily subsidize SBA fees and increase the 7(a)
loan guaranty program’s maximum loan guaranty percentage from 85% on loans
of $150,000 or less and 75% on loans exceeding $150,000 to 90% for all regular
7(a) loans.
• P.L. 111-240, the Small Business Jobs Act of 2010, authorized the Secretary of
the Treasury to establish a $30 billion Small Business Lending Fund (SBLF)
($4.0 billion was issued) to encourage community banks with less than $10
billion in assets to increase their lending to small businesses, a $1.5 billion State
Small Business Credit Initiative to provide funding to participating states with
small business capital access programs, numerous changes to the SBA’s loan
guaranty and contracting programs, funding to continue the SBA’s fee subsidies
and the 7(a) program’s 90% maximum loan guaranty percentage through
December 31, 2010, and about $12 billion in tax relief for small businesses.
• P.L. 111-322, the Continuing Appropriations and Surface Transportation
Extensions Act, 2011, authorized the SBA to continue its fee subsidies and the
7(a) program’s 90% maximum loan guaranty percentage through March 4, 2011,
or until available funding was exhausted, which occurred on January 3, 2011.
According to the SBA, the temporary fee subsidies and 90% maximum loan guaranty for the 7(a)
program “engineered a significant turnaround in SBA lending.... The end result is that the agency
helped put more than $42 billion in the hands of small businesses through the Recovery Act and
Jobs Act combined.”7
This report focuses on the SBLF. It begins with a discussion of the supply and demand for small
business loans. The SBLF’s advocates argued that the SBLF was an important part of a larger
effort to enhance the supply of small business loans. After describing the program’s structure, the
report then examines other arguments that were presented both for and against the program’s
enactment. Advocates argued that the SBLF would increase lending to small businesses and, in
turn, create jobs. Opponents argued that the SBLF could lose money, lacked sufficient oversight
provisions, did not require lenders to increase their lending to small businesses, could serve as a
vehicle for TARP recipients to effectively refinance their TARP loans on more favorable terms
with little or any resulting benefit for small businesses, and could encourage a failing lender to
make even riskier loans to avoid higher dividend payments.
The report concludes with an examination of the SBLF’s implementation by the Department of
the Treasury and a discussion of bills introduced during the 112th and 113th Congresses to amend
the SBLF. For example, during the 112th Congress S. 681, the Greater Accountability in the

7 U.S. Small Business Administration, “Jobs Act Supported More Than $12 Billion in SBA Lending to Small
Businesses in Just Three Months,” January 3, 2010, at http://www.sba.gov/content/jobs-act-supported-more-12-billion-
sba-lending-small-businesses-just-three-months.
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Lending Fund Act of 2011, would have, among other provisions, limited the program’s authority
to 15 years from enactment and prohibited TARP recipients from participating in the program.
H.R. 2807, the Small Business Leg-Up Act of 2011, would have transferred any unobligated and
repaid funds from the SBLF when its investment authority expired on September 27, 2011, to the
Community Development Financial Institutions Fund “to continue the program of making capital
investments in eligible community development financial institutions in order to increase the
availability of credit for small businesses.”8 H.R. 3147, the Small Business Lending Extension
Act, would have, among other provisions, extended the Treasury Department’s investment
authority from one year following the date of enactment to two years. During the 113th Congress,
H.R. 2474, the Community Lending and Small Business Jobs Act of 2013, would transfer any
unobligated and repaid funds from the SBLF to the Community Development Financial
Institutions Fund.
Three Indicators of the Supply and Demand for
Small Business Loans

Federal Reserve Board: Survey of Senior Loan Officers
Each quarter, the Federal Reserve Board surveys senior loan officers concerning their bank’s
lending practices. The survey includes questions about both the supply and demand for small
business loans. For example, the survey includes a question concerning their bank’s credit
standards for small business loans: “Over the past three months, how have your bank’s credit
standards for approving applications for C&I [commercial and industrial] loans or credit lines—
other than those to be used to finance mergers and acquisitions—for small firms (defined as
having annual sales of less than $50 million) changed?” The senior loan officers are asked to
indicate if their bank’s credit standards have “Tightened considerably,” “Tightened somewhat,”
“Remained basically unchanged,” “Eased somewhat,” or “Eased considerably.” Subtracting the
percentage of respondents reporting “Eased somewhat” and “Eased considerably” from the
percentage of respondents reporting “Tightened considerably” and “Tightened somewhat”
provides an indication of the market’s supply of small business loans.
As shown in Figure 1, senior loan officers reported that they tightened small business loan credit
standards during the early 2000s, loosened them during the mid-2000s, and tightened them during
the late 2000s. Since 2009, small business credit markets have improved, and most senior loan
officers report that they are no longer tightening their small business lending standards.
The survey also includes a question concerning the demand for small business loans: “Apart from
normal seasonal variation, how has demand for C&I loans changed over the past three months for
small firms (annual sales of less than $50 million)?” Senior loan officers are asked to indicate if
demand was “Substantially stronger,” “Moderately stronger,” “About the same,” “Moderately
weaker,” or “Substantially weaker.” Subtracting the percentage of respondents reporting
“Moderately weaker” and “Substantially weaker” from the percentage of respondents reporting
“Substantially stronger” and “Moderately stronger” provides an indication of the market’s
demand for small business loans.

8 H.R. 2807, the Small Business Leg-Up Act of 2011.
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As shown in Figure 1, senior loan officers reported that the demand for small business loans
declined from 2000 to 2004, increased from 2004 to late 2006, declined somewhat in 2007 and
2008, and declined significantly in 2009. Demand then leveled off (at a relatively reduced level)
during 2010, increased somewhat during the first half of 2011, declined somewhat during the
latter half of 2011, and has increased somewhat since then.9
Figure 1. Small Business Lending Environment, 2000-2013
(senior loan officers’ survey responses)
80%
60%
Tightening Standards
Increasing Demand
40%
20%
0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
-20%
-40%
Loosening Standards
-60%
Decreasing Demand
-80%
Bank Lending Standards
Small Businesses Demand for Loans

Source: Federal Reserve Board, “Senior Loan Officer Opinion Survey on Bank Lending Practices,” at
http://www.federalreserve.gov/boarddocs/SnLoanSurvey/; and Brian Headd, “Forum Seeks Solutions To Thaw
Frozen Small Business Credit,” The Small Business Advocate, vol. 28, no. 10 (December 2009), p. 3, at
http://www.sba.gov/sites/default/files/The%20Small%20Business%20Advocate%20-%20December%202009.pdf.
Federal Deposit Insurance Corporation: Outstanding Loan Balance
The Federal Deposit Insurance Corporation (FDIC) has maintained comparable small business
lending data for the second quarter (June 30) of each year since 2002. Figure 2 shows the amount
of outstanding small business loans (defined by the FDIC as commercial and industrial loans of
$1 million or less) for non-agricultural purposes as of June 30 of each year since 2005. As shown
in Figure 2, the amount of outstanding small business loans for non-agricultural purposes peaked
at $711.5 billion as of June 30, 2008, and has decreased each year since then, although the

9 Federal Reserve Board, “Senior Loan Officer Opinion Survey on Bank Lending Practices,” at
http://www.federalreserve.gov/boarddocs/SnLoanSurvey/.
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decrease was relatively small from 2012 to 2013.10 The amount of small business outstanding
debt for non-agricultural purposes as of June 30, 2013, was $585.3 billion.
Figure 2. Outstanding Small Business Loans, Non-Agricultural Purposes, 2005-2013
(billions of $)
$750
$730
$711.5
$710
$696.8
$695.2
$690
$670
$650
$652.2
$634.2
$630
$610
$607.0
$601.5
$590
$587.8
$585.3
$570
$550
2005
2006
2007
2008
2009
2010
2011
2012
2013

Source: Federal Deposit Insurance Corporation, “Statistics on Depository Institutions,” at http://www2.fdic.gov/
SDI/main.asp.
Notes: Data as of June 30 each year.
Although a declining amount of small business outstanding debt does not necessarily mean that
the supply of small business loans is declining, many, including the SBA, view the decline in
small business outstanding debt as a signal that small businesses might be experiencing difficulty
accessing sufficient capital to enable them to lead job growth during the current recovery.
Federal Reserve Board: Survey of Commercial Banks
The Federal Reserve Board conducts a quarterly “Survey of Terms of Business Lending” which
provides information concerning the lending activity of commercial banks.11 As shown in Figure
3
, the Federal Reserve Board data indicate that the total estimated value of commercial and
industrial loans (hereafter C&I loans) provided by commercial banks has experienced some

10 Federal Deposit Insurance Corporation, “Statistics on Depository Institutions,” at http://www2.fdic.gov/SDI/
main.asp.
11 The Survey of Terms of Business Lending collects data on gross loan extensions made during the first full business
week in the middle month of each quarter. The authorized panel size for the survey is 348 domestically chartered
commercial banks and 50 U.S. branches and agencies of foreign banks. The sample data are used to estimate the terms
of loans extended during that week at all domestic commercial banks and all U.S. branches and agencies of foreign
banks. See Board of Governors of the Federal Reserve System, “Survey of Terms of Business Lending - E.2, May 6-10,
2013,” at http://www.federalreserve.gov/releases/E2/current/default.htm.
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volatility over the years—from a high of $121.1 billion during the second quarter of 2006 to less
than half of that amount during fourth quarter of 2009 and the first, second, and third quarters of
2010. Also, as shown in Figure 3, the total estimated value of commercial banks’ C&I loans fell
during all four quarters in 2009 and the first quarter in 2010, and, with some declines, has been
generally increasing since then.
Figure 3. Estimated Value of Commercial and Industrial Loans Made By Commercial
Banks on a Quarterly Basis, 2005-2013
(billions of $)
$130
$120
$110
$100
$90
$80
$70
$60
$50
$40
2005
2006
2007
2008
2009
2010
2011
2012
2013
Value of Commercial Banks' Commercial and Industrial Loans, By Quarter

Source: Board of Governors of the Federal Reserve System, “Survey of Terms of Business Lending - E.2,” at
http://www.federalreserve.gov/releases/E2/default.htm.
Notes: The data were col ected during the first ful business week in the middle month of each quarter. Value is
the amount borrowed.
As shown in Figure 4, the data also indicate that the estimated value of commercial banks’ small
business loans (defined by the Federal Reserve Board as a C&I loan under $1 million) has been
somewhat less volatile, ranging from a high of $15.9 billion in the second quarter of 2006 to a
low of $10.0 billion in the third quarter of 2009. Since then, the estimated value of commercial
banks’ small business lending (as defined by the Federal Reserve Board) has, with some declines,
been generally increasing. During the third quarter of 2013 (the latest available data), the
estimated value of commercial banks’ small business loans was just under $15.0 billion.
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Figure 4. Estimated Value of Commercial and Industrial Loans Made By Commercial
Banks in Amounts Under $1 Million, on a Quarterly Basis, 2005-2013
(billions of $)
$20
$16
$12
$8
$4
2005
2006
2007
2008
2009
2010
2011
2012
2013
Value of Commerical Banks' Commerical and Industrial Loans Under
$1 million (Federal Reserve Board's proxy for small business loans),
By Quarter

Source: Board of Governors of the Federal Reserve System, “Survey of Terms of Business Lending - E.2,” at
http://www.federalreserve.gov/releases/E2/default.htm.
Notes: The data were col ected during the first ful business week in the middle month of each quarter. Value is
the amount borrowed. The estimated value of commercial banks’ commercial and industrial loans in amounts
under $1 million, on an annualized basis, was $53.6 billion in 2005, $56.1 billion in 2006, $51.2 billion in 2007,
$53.4 billion in 2008, $43.1 billion in 2009, $49.1 billion in 2010, $52.6 billion in 2011, $56.5 billion in 2012, and
an estimated $59.7 billion in 2013 (extrapolated from the first three quarters of the year).
Factors that May Have Contributed to the Decline in the Supply of
Small Business Loans in 2007-2010

According to an SBA-sponsored study of small business lending, several factors have contributed
to the recent decline in small business lending.12 The report’s authors noted that the 30% decline
in home prices from their peak in 2006 to 2010 diminished the value of collateral for many small
business borrowers. Many small business owners had relied on home equity loans to finance their
small businesses during the real estate boom. They concluded that the absence of this additional
source of collateral may have contributed to a decline in lending to small businesses.13 They also
argued that many small businesses found it increasingly difficult to renew existing lines of credit
as lenders became more cautious as a result of slow economic growth and an increasing risk of
loan defaults, especially among small business startups which are generally considered among the

12 George W. Haynes and Victoria Williams, Lending by Depository Lenders to Small Businesses, 2003 to 2010, U.S.
Small Business Administration, Office of Advocacy, March 2011, at http://www.sba.gov/sites/default/files/
rs380tot.pdf.
13 Ibid., p. 25.
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most risky investments.14 About half of all new small businesses fail in their first year. They also
argued that
• in this newly regulated market, smaller lenders are likely to be less profitable
because they have fewer sales of products and services to spread out over the
higher auditing and FDIC costs. Hence, they have less money to lend to small
businesses and others, and
• the relative difficulty in assessing creditworthiness due to the lack of information
about potential financial performance is very high in small business lending,
especially in financial markets driven by factor—rather than relationship—
lending. Therefore, one would expect the small business loan market to recover
more slowly than other financial markets.15
The authors also noted that FDIC data indicated that in recent years small business lending had
not only declined in absolute terms (the total amount of dollars borrowed and the total number of
small business loans issued), but in relative terms as well (the market share of business loans):
Over the eight years from 2003 through 2010, small business loans as a share of total
business loans declined by more than 12 percentage points, from 81.7% in 2003 to 68.9% in
2010. Perhaps of most concern is the further decline in the ratios of small business loans to
total assets and small business loans to total business loans. Small business loans constituted
about 16.8% of total assets in 2005, but only 15.3% in 2010; hence, small business lending is
becoming less significant for these lenders. Small business lending is also losing market
share in the business loan market. In the eight-year period from 2003 to 2010, small business
loans as a share of total business loans declined more than 10 percentage points from 81.7%
in 2003 to 68.9% in 2010.16
Factors that May Have Contributed to the Decline in the Demand
for Small Business Loans in 2007-2010

According to the previously mentioned SBA-sponsored study of small business lending, the
demand for small business loans fell during the recession primarily because many small
businesses experienced a decline in sales, and many small business owners had a heightened level
of uncertainty concerning future sales. The study’s authors argued that given small business
owners’ lack of confidence in the demand for their goods and services, many small business
owners decided to save capital instead of hiring additional employees and borrowing capital to
invest in business expansions and inventory.17
The responses of small business owners to a monthly survey by the National Federation of
Independent Business Research Foundation (NFIB) concerning small business owner’s views of
the economy support the argument that declining sales contributed to the decline in the demand
for small business loans. Since 2008, small business owners responding to the NFIB surveys have

14 Ibid., p. 26. One possible contributing factor for at least some lenders becoming more cautious is that in recent years
many lenders experienced an increase in non-performing loans and a depletion of their loan loss reserves, limiting the
funds available for lending to small businesses.
15 Ibid., p. 26.
16 Ibid., p. 25.
17 Ibid.
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identified poor sales as their number one problem. Prior to 2008, taxes had been reported as their
number one problem in nearly every survey since the monthly surveys began in 1986.18 Also,
employment data suggest that small businesses were particularly hard hit by the recession. As
mentioned previously, small businesses accounted for almost 60% of the net job losses during the
December 2007-June 2009 recession.19
According to testimony by the Secretary of the Treasury before the House Small Business
Committee on June 22, 2011, small businesses were especially hard hit by the recession because
Small businesses are concentrated in sectors that were especially hard hit by the recession
and the bursting of the housing bubble: construction and real estate. More than one-third of
all construction workers are employed by firms with less than 20 workers, and an additional
third are employed by businesses with fewer than 100 employees. Just over half of those
employed in the real estate, rental, and leasing sectors work for businesses with less than 100
workers on their payrolls. More broadly, the rate of job losses was almost twice as high in
small businesses as it was in larger firms during the depths of the crisis.20
Also, as mentioned previously, in recent months small businesses have been adding jobs more
rapidly than larger businesses. However, unemployment rates remain relatively high.21
The Congressional Response to the Decline in the Supply and
Demand for Small Business Loans

During the 111th Congress, legislation designed to increase both the supply and demand for small
business loans was adopted. For example, Congress provided more than $1.1 billion to
temporarily subsidize fees for the SBA’s 7(a) and 504/CDC loan guaranty programs and to
increase the 7(a) program’s maximum loan guaranty percentage from 85% on loans of $150,000
or less and 75% on loans exceeding $150,000 to 90% for all regular 7(a) loans (funding was
exhausted on January 3, 2011).22 The fee subsidies were designed to increase the demand for

18 William C. Dunkelberg and Holly Wade, Small Business Economic Trends (Washington, DC: NFIB Research
Foundation, September 2011), p. 18, at http://www.nfib.com/Portals/0/PDF/sbet/sbet201109.pdf; and William J.
Dennis, Jr., Small Business Credit in a Deep Recession (Washington, DC: NFIB Research Foundation, June 2008), p.
1, at http://www.nfib.com/LinkClick.aspx?fileticket=IPeviHUzXfE%3D&tabid=90&mid=3121.
19 U.S. Small Business Administration, “The Small Business Economy, 2010: A Report to the President,” pp. 2, 5, 21,
22, at http://www.sba.gov/sites/default/files/sb_econ2010.pdf; and U.S. Small Business Administration, Fiscal Year
2010 Congressional Budget Justification
, p. 1, at http://www.sba.gov/sites/default/files/
Congressional_Budget_Justification_2010.pdf.
20 U.S. Congress, House Committee on Small Business, The State of Small Business Access to Capital and Credit: The
View from Secretary Geithner
, 112th Cong., 1st sess., June 22, 2011, p. 1.
21 U.S. Small Business Administration, Office of Advocacy, “Small Business Quarterly Bulletin: Second Quarter
2012,” at http://www.sba.gov/sites/default/files/files/SBQB_2012q2.pdf.
22 P.L. 111-5, the American Recovery and Reinvestment Act of 2009, provided the SBA $375 million to subsidize fees
for the SBA’s 7(a) and 504/CDC loan guaranty programs and to increase the 7(a) program’s maximum loan guaranty
percentage from up to 85% of loans of $150,000 or less and up to 75% of loans exceeding $150,000 to 90% for all
regular 7(a) loans through September 30, 2010, or when appropriated funding for the subsidies and loan modification
was exhausted. P.L. 111-118, the Department of Defense Appropriations Act, 2010, provided the SBA $125 million to
continue the fee subsides and 90% maximum loan guaranty percentage through February 28, 2010. P.L. 111-144, the
Temporary Extension Act of 2010, provided the SBA $60 million to continue the fee subsides and 90% maximum loan
guaranty percentage through March 28, 2010. P.L. 111-150, an act to extend the Small Business Loan Guarantee
Program, and for other purposes, provided the SBA authority to reprogram $40 million in previously appropriated
funds to continue the fee subsides and 90% maximum loan guaranty percentage through April 30, 2010. P.L. 111-157,
(continued...)
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small business loans by reducing the cost of borrowing. The 90% loan guarantee was designed to
increase the supply of small business loans by reducing the risk of lending.
Congress also provided the SBA additional resources to expand its lending to small businesses.
For example, ARRA included a $255 million temporary, two-year small business stabilization
program to guarantee loans of $35,000 or less to small businesses for qualified debt
consolidation, later named the America’s Recovery Capital (ARC) Loan program (the program
ceased issuing new loan guarantees on September 30, 2010); an additional $15 million for the
SBA’s surety bond program and a temporary increase in that program’s maximum bond amount
from $2 million to $5 million, and up to $10 million under certain conditions (the higher
maximum bond amounts ended on September 30, 2010); an additional $6 million for the SBA’s
Microloan program’s lending program and an additional $24 million for the Microloan program’s
technical assistance program; and increased the funds (“leverage”) available to SBA-licensed
Small Business Investment Companies (SBICs) to no more than 300% of the company’s private
capital or $150 million, whichever is less.23
Several other programs were also enacted during the 111th Congress to increase the supply of
small business loans. For example, ARRA authorized the SBA to establish a temporary secondary
market guarantee authority to provide a federal guarantee for pools of first lien 504/CDC program
loans that are to be sold to third-party investors. ARRA also authorized the SBA to make below
market interest rate direct loans to SBA-designated “Systemically Important Secondary Market
(SISM) Broker-Dealers” who would use the loan funds to purchase SBA-guaranteed loans from
commercial lenders, assemble them into pools, and sell them to investors in the secondary loan
market.24
P.L. 111-240, the Small Business Jobs Act of 2010, extended the SBA’s secondary market
guarantee authority from two years after the date of ARRA’s enactment to two years after the date
of the program’s first sale of a pool of first lien position 504/CDC loans to a third-party investor
(which took place on September 24, 2010).25 The act also increased the loan guarantee limits for
the SBA’s 7(a) program from $2 million to $5 million, and for the 504/CDC program from $1.5
million to $5 million for “regular” borrowers, from $2 million to $5 million if the loan proceeds
are directed toward one or more specified public policy goals, and from $4 million to $5.5 million
for manufacturers. It also increased the SBA’s Microloan program’s loan limit for borrowers from
$35,000 to $50,000 and for microlender intermediaries after their first year in the program from
$3.5 million to $5 million.26 It also temporarily increased for one year (through September 26,

(...continued)
the Continuing Extension Act of 2010, provided the SBA $80 million to continue the SBA’s fee subsides and 90%
maximum loan guaranty percentage through May 31, 2010. P.L. 111-240, the Small Business Jobs Act of 2010,
provided $505 million (plus an additional $5 million for administrative expenses) to continue the SBA’s fee subsides
and 90% maximum loan guaranty percentage from the act’s date of enactment (September 27, 2010) through December
31, 2010. P.L. 111-322, the Continuing Appropriations and Surface Transportation Extensions Act, 2011, authorizes
the SBA to use funds provided under the Small Business Jobs Act of 2010 to continue the SBA’s fee subsides and 90%
maximum loan guaranty percentage through March 4, 2011, or until available funding is exhausted—which occurred
on January 3, 2011.
23 P.L. 111-5, the American Recovery and Reinvestment Act of 2009, §505, Increasing Small Business Investment.
24 Ibid.
25 U.S. Small Business Administration, Office of Congressional and Legislative Affairs, correspondence with the
author, January 4, 2010.
26 The act also temporarily allowed the SBA to waive, in whole or in part, for successive fiscal years, the non-federal
share requirement for loans to the Microloan program’s intermediaries and for grants made to Microloan intermediaries
(continued...)
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2011) the SBA 7(a) Express Program’s loan limit from $350,000 to $1 million. The act also
authorized the Secretary of the Treasury to establish the $30 billion SBLF and a $1.5 billion State
Small Business Credit Initiative to provide funding to participating states with small business
capital access programs.
The SBLF
The SBLF was designed “to address the ongoing effects of the financial crisis on small businesses
by providing temporary authority to the Secretary of the Treasury to make capital investments in
eligible institutions in order to increase the availability of credit for small businesses.”27 The
SBLF’s legislative history, including differences in the House- and Senate-passed versions of the
program, is provided in the Appendix.
P.L. 111-240 authorized the Secretary of the Treasury to make up to $30 billion in capital
investments in eligible institutions with total assets equal to or less than $1 billion or $10 billion
(as of the end of the fourth quarter of calendar year 2009).28 The authority to make capital
investments in eligible institutions was limited to one year after enactment.
Eligible financial institutions with total assets equal to or less than $1 billion as of the end of the
fourth quarter of calendar year 2009 could apply to receive a capital investment from the SBLF in
an amount not exceeding 5% of risk-weighted assets, as reported in the FDIC call report
immediately preceding the date of application. During the fourth quarter of 2009, 7,340 FDIC-
insured lending institutions reported having assets amounting to less than $1 billion.29
Eligible financial institutions with total assets equal to or less than $10 billion as of the end of the
fourth quarter of calendar year 2009 could apply to receive a capital investment from the fund in
an amount not exceeding 3% of risk-weighted assets, as reported in the FDIC call report
immediately preceding the date of application. During the fourth quarter of 2009, 565 FDIC-
insured lending institutions reported having assets of $1 billion to $10 billion.30
Risk-weighted assets are assets such as cash, loans, investments, and other financial institution
assets that have different risks associated with them. FDIC regulations (12 C.F.R. §567.6)

(...continued)
for small business marketing, management, and technical assistance under specified circumstances (e.g., the economic
conditions affecting the intermediary). See P.L. 111-240, the Small Business Jobs Act of 2010, §1401. Matching
Requirements Under Small Business Programs.
27 P.L. 111-240, the Small Business Jobs Act of 2010, §4101, Purpose. In 2011, there were 7,513 FDIC-insured lending
institutions in the United States. Of that number, 6,846 lending institutions had assets amounting to less than $1 billion
(totaling $1.42 trillion), 561 lending institutions had assets of $1 billion to $10 billion (totaling $1.43 trillion), and 106
lending institutions had assets greater than $10 billion (totaling $10.76 trillion). See FDIC, “Quarterly Banking Profile:
Second Quarter 2011,” at http://www2.fdic.gov/qbp/2011jun/qbp.pdf.
28 Eligible institutions may be insured depository institutions that are not controlled by a bank holding company or a
savings and loan holding company that is also an eligible institution and is not directly or indirectly controlled by any
company or other entity that has total consolidated assets of more than $10 billion, bank holding companies, savings
and loan holding companies, and community development financial institution loan funds, all with total assets of $10
billion or less (as of the end of 2009).
29 FDIC, “Quarterly Banking Profile: Fourth Quarter 2009,” at http://www2.fdic.gov/qbp/2009dec/qbp.pdf.
30 Ibid. In the fourth quarter of 2009, 107 FDIC-insured lending institutions had assets greater than $10 billion.
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establish that cash and government bonds have a 0% risk-weighting; residential mortgage loans
have a 50% risk-weighting; other types of assets (such as small business loans) have a higher
risk-weighting.31
Lending institutions on the FDIC problem bank list or institutions that have been removed from
the FDIC problem bank list for less than 90 days are ineligible to participate in the program.
Lending institutions can refinance securities issued through the Treasury Capital Purchase
Program (CPP) and the Community Development Capital Incentive (CDCI) program under
TARP, but only if the institution had not missed more than one dividend payment due under those
programs.
Participating banks are charged a dividend rate of 5% per annum initially, with reduced rates
available if the bank increases its small business lending by specified amounts. For example,
during any calendar quarter in the initial two years of the capital investments under the program,
the bank’s dividend rate is lowered if it increases its small business lending, as reported in its
FDIC call reports, compared to the average small business lending it made in the four previous
quarters immediately preceding the law’s enactment, minus some allowable adjustments.32 A
2.5% to 5% increase in small business lending lowers the rate to 4%, a 5% to 7.5% increase
lowers the rate to 3%, a 7.5% to 10% increase lowers the rate to 2%, and an increase greater than
10% lowers the rate to 1%. Table 1 shows the dividend rates associated with small business
lending increases by financial institutions.
Table 1. Small Business Lending Increases and Dividend Rates Under the SBLF
Small Business Lending Increase
Dividend Rate
10% or greater
1%
at least 7.5% but less than 10%
2%
at least 5% but less than 7.5%
3%
at least 2.5% but less than 5%
4%
Less than 2.5%
5%
No increase
7%
Source: P.L. 111-240, the Smal Business Jobs Act of 2010, Section 4103. Smal Business Lending Fund.
Note: The dividend rate increases to 9% at the end of the five-year period that begins on the date of the capital
investment under the program.
SBLF applicants are required to submit a small business lending plan to the appropriate federal
banking agency and, for applicants that are state-chartered banks, to the appropriate state banking
regulator. The plan must describe how the applicant’s business strategy and operating goals will
allow it to address the needs of small businesses in the areas it serves, as well as a plan to provide
linguistically and culturally appropriate outreach, where appropriate. The plan is treated as

31 For further analysis of risk-weighted assets, see CRS Report R40249, Who Regulates Whom? An Overview of U.S.
Financial Supervision
, by Edward V. Murphy.
32 The FDIC defines a small business loan as a loan of $1 million or less. P.L. 111-240 specified that small business
lending included commercial and industrial loans, owner-occupied nonfarm, nonresidential real estate loans, loans to
finance agricultural production and other loans to farmers, and loans secured by farmland. Loans that have an original
amount greater than $10 million, or that go to a business with more than $50 million in revenues, are not allowed.
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confidential supervisory information. The Secretary of the Treasury is required to consult with the
appropriate federal banking agency or, in the case of an eligible institution that is a non-
depository community development financial institution, the Community Development Financial
Institution Fund, before determining if the eligible institution may participate in the program.33
The act directed that all funds received by the Secretary of the Treasury in connection with
purchases made by the SBLF, “including interest payments, dividend payments, and proceeds
from the sale of any financial instrument, shall be paid into the general fund of the Treasury for
reduction of the public debt.”34
Arguments For and Against the SBLF
The SBLF’s advocates argued that it would create jobs by encouraging lenders, especially those
experiencing liquidity problems (access to cash and easily tradable assets),35 to increase their
lending to small businesses. For example, the House report accompanying H.R. 5297, the Small
Business Lending Fund Act of 2010, argued that the SBLF was needed to enhance small
business’s access to capital, which, in turn, was necessary to enable those businesses to create
jobs and assist in the economic recovery:
There has been a dramatic decrease in the amount of bank lending in the past several
quarters. On May 20, 2010, the Federal Deposit Insurance Corporation (FDIC) released its
Quarterly Banking Profile for the first quarter of 2010. The report shows that commercial
and industrial loans declined for the seventh straight quarter, down more than 17% from the
year before.
Many companies, particularly small businesses, claim that it is becoming harder to get new
loans to keep their business operating and that banks are tightening requirements or cutting
off existing lines of credit even when the businesses are up to date on their loan repayments.
Treasury Secretary Timothy F. Geithner recently acknowledged the problem encountered by
some banks, both healthy and troubled, which have been told to maintain capital levels in
excess of those required to be considered well capitalized.
Some banks say they have little choice but to scale back lending, even to creditworthy
borrowers, and the most recent Federal Reserve data shows banks are continuing to tighten
lending terms for small businesses.36

33 If the appropriate banking agency would not otherwise recommend that the eligible institution receive the capital
investment, the Secretary of the Treasury was authorized, in consultation with the appropriate banking agency, to
consider allowing the eligible institution to participate in the program if the eligible institution provided matching
capital from private, non-governmental sources that is equal to or greater than 100% of the SBLF investment and that
matching capital is subordinate to the capital investment from the SBLF.
34 P.L. 111-240, the Small Business Jobs Act of 2010, §4103. Small Business Lending Fund. Using a cost-based
estimate, the Congressional Budget Office estimated that the SBLF would result in net outlays of $3.3 billion over
2010-1015, and would reduce outlays by $1.1 billion over the 2010-2020 period. Using an alternative fair-value
estimate, the Congressional Budget Office estimated that the SBLF would result in net outlays of $6.2 billion over the
2010-2020 time period. See U.S. Congressional Budget Office, “Cost Estimate: H.R. 5297, Small Business Lending
Fund Act of 2010,” June 28, 2010, pp. 3, 4, at http://www.cbo.gov/ftpdocs/115xx/doc11595/hr5297_HousePassed.pdf.
35 For further information and analysis concerning lender liquidity issues, see CRS Report R41073, Government
Interventions in Response to Financial Turmoil
, by Baird Webel and Marc Labonte.
36 H.Rept. 111-499, To Create the Small Business Lending Fund Program to Direct the Secretary of the Treasury to
Make Capital Investments in Eligible Institutions in order to Increase the Availability of Credit for Small Businesses,
(continued...)
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A dissenting view, endorsed by the House Committee on Financial Services’ minority members,
was included in the report. They argued that the SBLF does not properly deal with the lack of
financing for small businesses:
Instead of addressing the problem by stimulating demand for credit by small businesses,
H.R. 5297 injects capital into banks with no guarantees that they will actually lend. The bill
allows a qualifying bank to obtain a capital infusion from the government without even
requiring the bank to make a loan for two years. In fact, if a bank reduces or fails to increase
lending to small business during those first two years, it would not face any penalty. It defies
logic that the Majority would support a bill to increase lending that does not actually require
increased lending. A more effective response to the challenges facing America’s small
businesses was offered by Representatives Biggert, Paulsen, Castle, Gerlach, and King,
whose amendment would have extended a series of small business tax credits before
implementing the Small Business Lending Fund.37
They also argued that even if the SBLF was authorized “the program probably would not be fully
operational for months; banks could shun the program for fear of being stigmatized by its
association with TARP; and many banks would avoid taking on new liabilities when their existing
assets are troubled.”38 They also argued that the bill did not provide sufficient oversight for
effectively monitoring the program because the Inspector General of the Department of the
Treasury, who was given that responsibility under the bill, “might not be able to direct sufficient
attention to this task given its other responsibilities.”39 They argued that the Special Inspector
General of TARP would be in a better position to provide effective oversight of the program.40
These, and other, arguments were presented during House floor debate on the bill. For example,
Representative Melissa Bean advocated the bill’s passage, arguing that the SBLF
builds on the effective financial stabilization measures Congress has previously taken by
establishing a new $30 billion small business loan fund to provide additional capital to
community banks that increase lending to small businesses. This $30 billion investment on
which the government will be collecting dividends and earning a profit per the CBO
estimates can be leveraged by banks into over $300 billion in new small business loans. This
is an important investment by the Federal Government in our small business that brings
tremendous returns.
The terms of the capital provided to banks are performance based; the more a bank increases
its small business lending, the lower the dividend rate is for the SBLF capital. If a bank
decreases its small business lending, it will be penalized with higher dividend rates.
This legislation includes strong safeguards to ensure that banks adequately utilize available
funds to increase lending to small businesses, not for other lending or to improve their
balance sheet. There will be oversight consistently throughout the program, plus it requires
that the capital be invested only in strong financial institutions at little risk of default and the
best positioned to increase small business lending.

(...continued)
and for other purposes, p. 16.
37 Ibid., p. 37.
38 Ibid., pp. 37, 38.
39 Ibid., p. 38.
40 Ibid.
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It’s important for Americans to understand that although this fund has a maximum value of
$30 billion, it is estimated to make a profit for taxpayers in the long run. And the money will
ultimately go not to banks, but to the small businesses and their communities that they lend
to. As our financial system stabilizes and our community banks recapitalize, these funds will
be repaid to Treasury with full repayment required over the next 10 years.41
Representative Nydia Velázquez, then the chair of the House Committee on Small Business,
added that the legislation had sufficient safeguards in place to ensure that the funds were targeted
at small businesses:
First, banks must apply to the Treasury to receive funds, with a detailed plan on how to
increase small business lending at their institution. This language was included at my
insistence that we need to make sure that small businesses will get the benefit of this
legislation.
Second, this capital, repayment of the government loans will be at a dividend rate starting at
5% per year. This rate will be lowered by 1% for every 2.5% increase in small business
lending over 2009 levels. It can go as low as a total dividend rate of just 1% if the bank
increases its business lending by 10% or more, incentivizing banks to do the right thing. To
ensure that banks actually use the funding they receive, the rate will increase—and there are
penalties—to 7% if the bank fails to increase its small business lending at their institution
within 2 years. To ensure that all federal funds are paid back within 5 years, the dividend rate
will increase to 9% for all banks, irrespective of their small business lending, after 4 1/2
years.42
Representative Velázquez added “let me just make it clear … CBO estimates that [the SBLF] will
save taxpayers $1 billion over 10 years, as banks are expected to pay back this loan over 10 years,
with interest.”43
Representative Randy Neugebauer opposed the bill’s adoption, arguing that
the majority is repeating the same failed initiatives that have helped our national debt grow
to $13 trillion in the past 2 years. This bill follows the model of the TARP program, minus
[TARP’s] stronger oversight, and it puts another $30 billion into banks in the hopes that
lending to small businesses will increase. In the words of Neil Barofsky, the Special
Inspector General who oversees the TARP, “In terms of its basic design,” he says, “its
participants, its application process, from an oversight perspective, the Small Business
Lending Fund would essentially be an extension of the TARP’s Capital Purchase Program.”
From the Congressional Oversight Panel for TARP, chaired by Elizabeth Warren, she says,
“The SBLF’s prospects are far from certain. The SBLF also raises questions about whether,
in light of the Capital Purchase Program’s poor performance in improving credit access, any
capital infusion program can successfully jump-start small business lending.”
This bill allows for another $33 billion in spending that will be added to the government’s
credit card. The CBO tells us that the bank lending portion will ultimately cost taxpayers
$3.4 billion when market risk is taken into account.44

41 Representative Melissa Bean, “Consideration of the Small Business Jobs and Credit Act of 2010,” House debate,
Congressional Record, daily edition, vol. 156, no. 90 (June 16, 2010), p. H4514.
42 Representative Nydia Velázquez, “Consideration of the Small Business Jobs and Credit Act of 2010,” House debate,
Congressional Record, daily edition, vol. 156, no. 90 (June 16, 2010), p. H4518.
43 Ibid.
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The House passed H.R. 5297 by a vote of 241–182, on June 17, 2010.
The arguments presented during House floor debate on H.R. 5297 were also presented during
Senate consideration of the bill. Advocates argued that the SBLF would encourage higher levels
of small business lending and jobs. For example, Senator Mary Landrieu argued on July 21, 2010,
that the SBLF should be adopted because it “is not a government program for banks. It is a
public-private partnership lending strategy for small business.”45 She added that as chair of the
Senate Committee on Small Business and Entrepreneurship she talked with her colleagues,
including the SBLF’s opponents, and revised the program to address their concerns. She also
argued that the SBLF has
hundreds of endorsements from independent banks, the community banks and almost every
small business association in America … makes $1 billion [according to the CBO score] …
is not direct lending from the federal government. It is not creating a new bureaucracy … [It
is] voluntary … there are no onerous restrictions.… The small business gets the loans. We
create jobs. People are employed. The recession starts ending…. It has nothing to do with
TARP money. It is not a TARP program. It is not a bank program. It doesn’t have anything
to do with banks except that we are working in partnership with banks to lend money to
small businesses which are desperate for money.46
Opponents argued that the SBLF could lose money, lacked sufficient oversight provisions, did not
require lenders to increase their lending to small businesses, could serve as a vehicle for TARP
recipients to effectively refinance their TARP loans on more favorable terms with little or any
resulting benefit for small businesses, and could encourage a failing lender to make even riskier
loans to avoid higher dividend payments. In addition, there were disagreements over the number
of amendments that could be offered by the minority, which led several Senators to oppose
further consideration of the bill until that issue was resolved to their satisfaction. For example, on
July 22, 2010, Senator Olympia Snowe argued that although “under a cash-based estimate, CBO
listed the official score for the lending fund as raising $1.1 billion over 10 years,” SBLF
proponents “fail to mention” that when CBO scored the SBLF using an alternative methodology
that adjusts for market risk, it estimated that the SBLF could cost $6.2 billion.47 Senator Snowe
also argued that the bipartisan Congressional Oversight Panel for TARP stated in its May 2010
oversight report that the proposed SBLF “substantially resembles” the TARP program and “is a
bank-focused capital infusion program that is being contemplated despite little, if any, evidence
that such programs increase lending.”48 Senator Snowe also stated that she regretted “that we are
in a position where we have not been able to reach agreement allowing the minority to offer
amendments, which is confounding and perplexing as well as disappointing.”49 Senator Snowe

(...continued)
44 Representative Randy Neugebauer, “Consideration of the Small Business Jobs and Credit Act of 2010,” House
debate, Congressional Record, daily edition, vol. 156, no. 90 (June 16, 2010), p. H4515.
45 Senator Mary Landrieu, “Small Business Lending,” remarks in the Senate, Congressional Record, daily edition, vol.
156, no. 108 (July 21, 2010), p. S6070.
46 Ibid., p. S6071.
47 Senator Olympia Snowe, “Small Business Lending,” remarks in the Senate, Congressional Record, daily edition, vol.
156, no. 108 (July 22, 2010), pp. S6158.
48 Ibid.
49 Ibid., p. S6156.
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later added that the SBLF’s incentives to encourage lending to small businesses also “could
encourage unnecessarily risky behavior by banks … to avoid paying higher interest rates.”50
Opponents also questioned the SBLF’s use of quarterly call report data as submitted by lenders to
their appropriate banking regulator to determine what counts as a small business loan.51 Call
report data denotes loans of $1 million or less as small business loans, regardless of the size of the
business receiving the loan. As a result, the SBLF’s opponents argued that “the data used to
measure small business lending in the SBLF covers an entirely different set of small businesses
than those that fall within the definition set out in the Small Business Act or used by the SBA.”52
The Senate’s version of H.R. 5297 was agreed to on September 16, 2010, by a vote of 68-38.53
The House agreed to the Senate-passed version of H.R. 5297 on September 23, 2010, by a vote of
237-187, and the bill, retitled the Small Business Jobs Act of 2010, was signed into law by
President Obama on September 27, 2010.
The SBLF’s Implementation
On February 14, 2011, the Obama Administration issued its budget recommendation for FY2012.
It anticipated that the SBLF would provide $17.399 billion in financings, well below its
authorized amount of $30 billion.54 This was the first indication that the SBLF’s implementation
may not proceed as expected.55 The second indication that the program’s implementation may not
proceed as expected was an unanticipated delay in the writing of the program’s regulations.
Treasury’s Rollout of the Program
The U.S. Treasury was criticized by some for not implementing the program quickly enough.56
The first financing took place on June 21, 2011, about nine months after the program’s enactment.

50 Senator Olympia Snowe, “Small Business Lending Fund Act of 2010,” remarks in the Senate, Congressional Record,
daily edition, vol. 156, no. 125 (September 16, 2010), pp. S7157.
51 The act specified that the SBLF could not be used to provide loans greater than $10 million or that go to a business
with more than $50 million in revenues. See P.L. 111-240, the Small Business Jobs Act of 2010, §4102. Definitions.
52 Representative Sam Graves, “Full Committee Hearing, The State of Small Business Access to Credit and Capital:
The View from Secretary Geithner,” Letter to Members of the House Small Business Committee, Washington, DC,
June 20, 2011, p. 19, at http://smbiz.house.gov/UploadedFiles/6-22_Memo.pdf.
53 Senator Kay Hagen, “Motion to Invoke Cloture on H.R. 5297, the Small Business Lending Fund Act of 2010,”
Rollcall Vote No. 236 Leg., Congressional Record, daily edition, vol. 156, part 125 (September 16, 2010), p. S7158;
and Senator Al Franken, “Small Business Lending Fund Act of 2010,” Rollcall Vote No. 237 Leg., Congressional
Record
, daily edition, vol. 156, part 125 (September 16, 2010), p. S7158.
54 U.S. Office of Management and Budget, Budget of the United States Government, Fiscal Year 2012, Appendix:
Department of the Treasury
, p. 989, at http://www.whitehouse.gov/sites/default/files/omb/budget/fy2012/assets/tre.pdf
55 The Department of the Treasury based its forecast on an “analysis of demand for the program.” See U.S. Department
of the Treasury, “FY2012 Congressional Justification, Small Business Lending Fund,” p. 7, at http://www.treasury.gov/
about/budget-performance/Documents/CJ_FY2012_SBLF_508.pdf.
56 Representative Sam Graves, “Graves Questions Treasury Secretary Timothy Geithner on Access to Capital for Small
Businesses,” press release, June 22, 2011, at http://www.smallbusiness.house.gov/News/DocumentSingle.aspx?
DocumentID=248058; and U.S. Congress, House Committee on Small Business, The State of Small Business Access to
Capital and Credit: The View From Secretary Geithner
, 112th Cong., 1st sess., June 22, 2011, Small Business
Committee Document No. 112-023 (Washington: GPO, 2011), pp. 3, 9-11, 22, 25. Also see U.S. Government
Accountability Office, Additional Actions Needed to Improve Transparency and Accountability, GAO-12-183,
(continued...)
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The delay was largely due to the Treasury’s need to finalize the SBLF’s investment decision
process with federal banking agencies57 and the need to create separate SBLF regulations for
financial institutions established as C Corporations, Subchapter S Corporations, mutual lending
institutions, and community development financial institutions (CDFIs).
A “C corporation” is a legal entity established under state law and includes shareholders,
directors, and officers. The profit of a C corporation is taxed to the corporation when earned, and
then is taxed to the shareholders when distributed as dividends.58 The majority of insured
depository institutions, bank holding companies, and savings and loan holding companies are C
corporations.59 A “Subchapter S Corporation” refers to a section of the Internal Revenue Code
(IRS) that allows a corporation to pass corporate income, losses, deductions, and credits through
to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-
through of income and losses on their personal tax returns and are assessed tax at their individual
income tax rates. This allows S corporations to avoid double taxation on the corporate income.60
Mutual lending institutions, which include many thrifts and savings and loans associations, are
owned by its depositors or policyholders. They have no stockholders. CDFIs are financial entities
certified by the Community Development Financial Institutions Fund (CDFI Fund) in the U.S.
Department of the Treasury, and provide capital and financial services to underserved
communities.
The establishment of separate regulations for each of these different types of financial institutions
was largely related to issues involving whether the SBLF’s financings would be counted by
banking regulatory agencies as Tier 1 capital (core capital that is relatively liquid, such as
common shareholders’ equity, disclosed reserves, most retained earnings, and perpetual non-
cumulative preferred stocks) or as Tier 2 capital (supplementary capital that consists mainly of
undisclosed reserves, revaluation reserves, general provisions, hybrid instruments, and
subordinated term debt).61

(...continued)
December 14, 2011, at http://www.gao.gov/products/GAO-12-183.
57 Treasury and the federal banking agencies ultimately agreed that the banking agencies “would advise Treasury only
on the financial viability of applicants and their capacity to increase small business lending, and that they would not
make investment recommendations as they had for TARP. It was agreed that an applicant would be considered “viable”
if it was (1) adequately capitalized; (2) not expected to become undercapitalized; and (3) not expected to be placed into
conservatorship or receivership. Further, the [agencies’] validation of viability of an applicant would reflect only
currently available supervisory information and rating assessments at the time the validation was made and would not
predict Treasury’s loss from making an investment in the institution.” See U.S. Department of the Treasury, Office of
the Inspector General. Small Business Lending Fund: Investment Decision Process for the Small Business Lending
Fund
, May 13, 2011, p. 8, at http://www.treasury.gov/about/organizational-structure/ig/Documents/
SBLF%20Report%20(OIG-SBLF-11-001).pdf.
58 Internal Revenue Service, “Corporations,” at http://www.irs.gov/businesses/small/article/0,,id=98240,00.html.
59 U.S. Department of the Treasury, Office of the Inspector General. Small Business Lending Fund: Investment
Decision Process for the Small Business Lending Fund
, May 13, 2011, p. 7, at http://www.treasury.gov/about/
organizational-structure/ig/Documents/SBLF%20Report%20(OIG-SBLF-11-001).pdf.
60 Internal Revenue Service, “S Corporations,” at http://www.irs.gov/businesses/small/article/0,,id=98263,00.html.
61 12 C.F.R. §325.2: “Tier 1 capital or core capital means the sum of common stockholders’ equity, noncumulative
perpetual preferred stock (including any related surplus), and minority interests in consolidated subsidiaries, minus all
intangible assets (other than mortgage servicing assets, nonmortgage servicing assets, and purchased credit card
relationships eligible for inclusion in core capital pursuant to §325.5(f)), minus credit-enhancing interest-only strips
that are not eligible for inclusion in core capital minus deferred tax assets in excess of the limit set forth in §325.5(g),
minus identified losses (to the extent that Tier 1 capital would have been reduced if the appropriate accounting entries
(continued...)
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The treatment of the SBLF’s financings was important given that banks must maintain a
minimum total risk-based capital ratio of 8% (the ratio measures bank capital against assets, with
asset values risk-weighted, or adjusted on a scale of riskiness) to be considered adequately
capitalized by federal banking regulators. In addition, banks must maintain a minimum Tier 1
risk-based ratio to assets, typically 3% for banking institutions with the highest financial ratings
and 4% for others.62
According to Treasury officials, under Internal Revenue Service (IRS) rules, S corporations can
have only a single class of stock (common shares). Consequently, these institutions cannot issue
preferred stock to Treasury. As a result, Treasury had to consider purchasing subordinated debt
from these institutions, which the banking regulatory agencies would likely designate as Tier 2
capital.63 Treasury officials believed that providing Tier 2 capital would probably result in fewer S
corporation participants. Additionally, because mutual institutions do not issue stock, Treasury
officials were unable to receive preferred stock as consideration for an investment in this type of
institution. Therefore, Treasury had to consider purchasing subordinated debt from these
institutions as well.64
Treasury completed its regulations for C corporation banks first. For C Corporations, SBLF funds
will be treated as Tier I capital and the Treasury will purchase senior perpetual noncumulative
preferred stock (or an equivalent). The stock will pay a quarterly dividend on the first day of each
quarter after closing of the SBLF capital program funding. Tier 1 capital is the core measure of a
bank’s financial strength from a regulator’s point of view. It is composed of core capital, which
consists primarily of common stock and disclosed reserves (or retained earnings), but may also
include non-redeemable non-cumulative preferred stock. In contrast, S Corporations and mutual
lending institutions will receive unsecured subordinated debentures from the Treasury, which will
be considered Tier 2 capital for regulatory capital requirements.65
The application deadline for C corporation banks was May 16, 2011. The application deadline for
Subchapter S corporations and mutual lending institutions was June 6, 2011, and the application
deadline for CDFIs was June 22, 2011. A total of 926 institutions applied for $11.8 billion in
SBLF funding.66

(...continued)
to reflect the identified losses had been recorded on the insured depository institution’s books), and minus investments
in financial subsidiaries subject to 12 CFR part 362, subpart E, and minus the amount of the total adjusted carrying
value of nonfinancial equity investments that is subject to a deduction from Tier 1 capital as set forth in section II.B.(6)
of appendix A to this part.”
62 For further information and analysis of federal banking regulations, see CRS Report R40249, Who Regulates Whom?
An Overview of U.S. Financial Supervision
, by Edward V. Murphy.
63 U.S. Department of the Treasury, Office of the Inspector General. Small Business Lending Fund: Investment
Decision Process for the Small Business Lending Fund
, May 13, 2011, p. 7, at http://www.treasury.gov/about/
organizational-structure/ig/Documents/SBLF%20Report%20(OIG-SBLF-11-001).pdf.
64 Ibid.
65 12 C.F.R. Appendix A to Part 3 - Risk-Based Capital Guidelines: “The following elements comprise a national
bank’s Tier 2 capital: (1) Allowance for loan and lease losses, up to a maximum of 1.25% of risk-weighted assets, 3
subject to the transition rules in section 4(a)(2) of this appendix A; 3 The amount of the allowance for loan and lease
losses that may be included in capital is based on a percentage of risk-weighted assets.”
66 U.S. Department of the Treasury, “Small Business Lending Fund Cost Report, Report to Congress submitted
pursuant to Section 4106(2) of the Small Business Jobs Act of 2010,” July 19, 2011, p. 1, at http://www.treasury.gov/
resource-center/sb-programs/DocumentsSBLFTransactions/SBLF%204106(2)%20Cost%20Report.pdf.
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Treasury approved $4,027,703,880 in SBLF financing to 332 lending institutions ($3.9 billion to
281 community banks and $104 million to 51 CDFIs).67 SBLF recipients have offices located in
47 states and the District of Columbia. The average financing was $12,131,638, ranging from
$42,000 to $141,000,000.68
Of the 332 lending institutions which received financing, 137 institutions had participated in
TARP’s Community Development Capital Initiative or its Capital Purchase Program. These
institutions received $2,689,763,790 in SBLF financing (66.8% of the total).69
Small Business Lending Progress Reports
Treasury is required to publish monthly reports describing all of the transactions made under the
SBLF program during the reporting period. It is also required to publish a semiannual report
(each March and September) providing all projected costs and liabilities, all operating expenses,
and all transactions made by the SBLF, including a list of all participating institutions and the
amounts each institution has received under the program. Treasury is also required to publish a
quarterly report describing how participating institutions have used the funds they have received
under the program.70
Institutions participating in the SBLF are required to submit an Initial Supplemental Report to
Treasury, no later than five business days before closing. It provides information from the
institution’s FDIC call reports or, for holding companies, from their subsidiaries’ FDIC call
reports, that Treasury uses to establish an initial baseline for measuring the SBLF participants’
progress in making loans to small businesses.71
The initial baseline small business lending amount is the average amount of qualified small
business lending that was outstanding for the four full quarters ending on June 30, 2010.72 This
initial baseline amount is derived by first adding the outstanding amount of lending reported for
all commercial and industrial loans, owner-occupied nonfarm, nonresidential real estate loans,
loans to finance agricultural production and other loans to farmers, and loans secured by
farmland. Then, the outstanding amount of lending for large loans (defined as any loan or group
of loans greater than $10 million), loans to large businesses (defined as businesses with annual
revenues greater than $50 million), and the portion of any loans guaranteed by the U.S.
government or for which the risk is assumed by a third party is subtracted from that amount. The
lending institution then adds back any cumulative charge-offs with respect to such loans since
July 1, 2010. This last adjustment is done to prevent lending institutions from being penalized for
appropriately charging off loans.73

67 U.S. Department of the Treasury, “SBLF Investments as of September 27, 2011,” at http://www.treasury.gov/
resource-center/sb-programs/DocumentsSBLFTransactions/SBLF_Bi-
Weekly_Transactions_Report_THRU_09272011.pdf.
68 Ibid.
69 Ibid.
70 P.L. 111-240, the Small Business Jobs Act of 2010, §4106. Reports.
71 U.S. Department of the Treasury, “SBLF: Getting Started Guide,” June 27, 2011, p. 13, at http://www.treasury.gov/
resource-center/sb-programs/Documents/SBLF%20Getting%20Started%20Guide.pdf.
72 Ibid.
73 Ibid., p. 15.
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The initial small business lending baseline for all SBLF participants, as of June 30, 2013, was
$36.5 billion ($35.7 billion for banks and $796.8 million for CDFIs).74 Because bank and CDFI
baseline lending amounts are adjusted to take into account any gains in qualified small business
lending during the four baseline quarters resulting from mergers, acquisitions, and loan
purchases, the participants’ baselines are expected to vary somewhat over time. For example, the
initial small business lending baseline for all SBLF participants, as of March 31, 2011, was
$35.52 billion ($34.75 billion for banks and $770.48 million for CDFIs).75 This adjustment is
designed to ensure that future dividend rate reductions provided to any SBLF participant
corresponds to additional lending to small businesses and not to the acquisition of existing
loans.76
SBLF institutions are also required to submit Quarterly Supplemental Reports, due in the calendar
quarter following submission of the Initial Supplemental Report and in each of the next nine
quarters, to determine their dividend rate for the next quarter.77
Using information contained in the Quarterly Supplemental Reports, Treasury announced in its
October 2013 quarterly report on “SBLF Participants’ Small Business Lending Growth” (updated
on November 1, 2013), that, as of June 30, 2013,
institutions participating in SBLF have made important progress in increasing their small
business lending, helping to support small businesses and local economies across the nation:
• In total, SBLF participants have increased their small business lending by $10.4 billion
over a $36.5 billion baseline, and by $1.4 billion over the prior quarter.
• Increases in small business lending are widespread across SBLF participants, with 92%
of participants having increased their small business lending over baseline levels.
• Most participants report that their small business lending increases have been
substantial, with 86% increasing small business lending by 10% or more.78
Treasury also provided information on changes in business lending by SBLF community banks
compared a peer group of 510 community banks that match the size, geography, and financial
condition of SBLF banks and a comparison group of 6,090 similarly sized community banks.
Treasury announced that, as of June 30, 2013, the 265 banks that continue to participate in SBLF:

74 U.S. Department of the Treasury, “Report on SBLF Participants’ Small Business Lending Growth, October 2013,” p.
4, at http://www.treasury.gov/resource-center/sb-programs/DocumentsSBLFTransactions/
LGR%20October%202013%20-cleared%20for%20transmittal%20with%20charts.pdf.
75 U.S. Department of the Treasury, “SBLF Use of Funds Report: Third Quarter 2011 (excel file),” October 26, 2011, at
http://www.treasury.gov/resource-center/sb-programs/Pages/sblf_transactions.aspx.
76 U.S. Department of the Treasury, “SBLF Quarterly 4106(3) Report – 4Q 2011,” at http://www.treasury.gov/resource-
center/sb-programs/DocumentsSBLFTransactions/Use%20of%20Funds%204016(3)%20Report%20-%2001-09-12.pdf.
77 U.S. Department of the Treasury, “SBLF: Getting Started Guide,” June 27, 2011, p. 13, at http://www.treasury.gov/
resource-center/sb-programs/Documents/SBLF%20Getting%20Started%20Guide.pdf.
78 U.S. Department of the Treasury, “Report on SBLF Participants’ Small Business Lending Growth, October 2013,” p.
1, at http://www.treasury.gov/resource-center/sb-programs/DocumentsSBLFTransactions/
LGR%20October%202013%20-cleared%20for%20transmittal%20with%20charts.pdf.
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• have increased business lending by substantially greater amounts across median
measures of size, geography, loan type, and financial condition versus peer and
comparison groups, and
• banks that refinanced CPP [TARP’s Capital Purchase Program] funding have
increased business lending by a median of 43.7% since their initial receipt of
CPP funding from Treasury versus a 15.9% increase for the peer group and a
9.6% increase for the comparison group over the same period.”79
Treasury officials have praised the SBLF’s performance. For example, on October 9, 2012,
Deputy Secretary of the Treasury Neal Wolin announced that the SBLF Quarterly Use of Funds
report released that day “is further indication that the Administration’s Small Business Lending
Fund is continuing to help create an environment in which entrepreneurial small businesses can
succeed and excel.”80 He added that “banks in the SBLF program continue to show large
increases in the lending available for small businesses to grow, create jobs, and support families
in communities across the country.”81
Some financial commentators have expressed a somewhat less sanguine view of the program’s
performance. For example, one commentator noted, after the release of the Quarterly Use of
Funds report in January 2012, that while the report of increased small business lending was
positive news “it is difficult to isolate the proportion of new lending that would have occurred
anyway” due to improvements in the economy.82 Another commentator noted that the data may
have been skewed by SBLF participants who were entering the small business lending market for
the first time, making the increases appear larger and more significant than they actually are;
another noted that the reported growth in small business lending occurred over six quarters (since
June 30, 2010) and that the results, while positive, are “not as impressive as it may seem.”83
Another argued in September 2012 that “if the SBLF ends up being a success story, it will have
been on a far smaller scale than either Obama or Congress had originally expected. What’s more,
it’s become clear that even boatloads of financing won’t change the fact that demand for the loans
themselves has also fallen off, as small businesses themselves are reluctant to expand in a
stagnant economy.”84
In addition, on August 29, 2013, Treasury’s Office of Inspector General (OIG) released an audit
of Treasury’s reporting of small business lending gains relative to small business lending levels
prior to the lenders’ participation in the program. The OIG found that “small business lending
gains reported by Treasury are significantly overstated and cannot be linked directly to SBLF
funding.”85 Specifically, the OIG noted that “substantial amounts [$3.4 billion of the then

79 Ibid.
80 U.S. Department of the Treasury, “Treasury Announces $6.7 Billion Increase in Small Business Lending at Banks
Receiving Capital through the Small Business Lending Fund (SBLF),” October 9, 2012, at http://www.treasury.gov/
press-center/press-releases/Pages/tg1731.aspx.
81 Ibid.
82 Harry Terris, “Former TARP Banks Lag Peers in SBLF Lending,” American Banker, vol. 177, no. 16, January 25,
2012.
83 Kate Davidson, “Was the SBLF Program a Success?” American Banker, vol. 177, no. 8, January 12, 2012.
84 Suzy Khimm, “Has Obama Really Helped Small Business?” The Washington Post, September 11, 2012, at
http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/09/11/has-obama-really-helped-small-businesses/.
85 U.S. Department of the Treasury, Office of the Inspector General, Small Business Lending Fund: Reported SBLF
Program Accomplishments Are Misleading Without Additional Reporting
, August 29, 2013, p. 8, at
http://www.treasury.gov/about/organizational-structure/ig/Audit%20Reports%20and%20Testimonies/OIG-SBLF-13-
(continued...)
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reported $8.9 billion] of the reported gains occurred prior to participants receiving SBLF
funding.” As the OIG explained, “the lending gains reported [by Treasury] were measured against
the same baseline period that the Small Business Jobs Act of 2010 (the Act) instructs Treasury to
use for setting dividend rates for repayment of the SBLF capital, which is the four calendar
quarters [which] ended [on] June 30, 2010. However, measuring program performance against a
baseline with a midpoint seven quarters prior to when most participants received funding inflates
program accomplishments and is not responsive to provisions in the Act that direct Treasury to
report on participant use of the SBLF funds received.”86
The OIG also argued that the reported lending gains cannot be directly linked to the SBLF capital
that Treasury invested in the financial institutions because the lending gains reported “represent
all small business lending gains that institutions participating in the SBLF achieved, regardless of
how the loans were funded.”87 The OIG also noted, among other findings, that “a relatively small
number (35 or 11%) of SBLF participants accounted for half of small business lending increases
between the baseline figure and December 31, 2012.”88
Proposed Legislation
During the 112th Congress, several bills were introduced to change the SBLF. None of the bills
were enacted. For example, then-Senator Snowe introduced S. 681, the Greater Accountability in
the Lending Fund Act of 2011, on March 30, 2011. Senator Snowe argued that
While I would prefer to terminate this fund altogether, it is unlikely based on the current
political environment, which is why we must work to protect taxpayers from some of its
most egregious provisions. My goal with this legislation is to ensure that only healthy banks
have access to taxpayer money, that they are required to repay loans within a reasonable
period of time, and that small businesses find the affordable credit they need.89
The bill would have, among other things,
• required recipients to repay SBLF distributions within 10 years of the receipt of
the investment,90
• terminated the program no later than 15 years after the date of the bill’s
enactment,91

(...continued)
012%20fix%209%2010%2013.pdf.
86 Ibid., pp. 3, 9-11.
87 Ibid., pp. 3, 11-13.
88 Ibid., p. 11.
89 U.S. Senator Olympia Snowe, “Snowe Calls for Comprehensive Fixes to Small Business Lending Fund,” press
release, March 30, 2011, at http://snowe.senate.gov/public/index.cfm/pressreleases?ContentRecord_id=b1507369-
8193-44ff-94ae-ceb94d5debe8&ContentType_id=ae7a6475-a01f-4da5-aa94-0a98973de620&Group_id=2643ccf9-
0d03-4d09-9082-3807031cb84a&MonthDisplay=3&YearDisplay=2011.
90 Current law provides the Treasury Secretary the discretion to extend the repayment period beyond 10 years. P.L.
111-240, the Small Business Jobs Act of 2010, §4103(d)(5)(h); 12 U.S.C. §4741.
91 Current law does not include a termination date for the program, other than terminating the authority to make capital
investments in eligible institutions one year after the date of enactment. P.L. 111-240, the Small Business Jobs Act of
2010, §4109. Termination and Continuation of Authorities.
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• prohibited the Secretary of the Treasury from making capital investments under
the program if the FDIC is appointed receiver of 5% or more of the institutions
receiving an investment under the program,
• prohibited participation by any institution that received an investment under
TARP (effective on the date of the bill’s enactment),
• removed provisions allowing the Secretary of Treasury to make a capital
investment in institutions that would otherwise not be recommended to receive
the investment based on the institution’s financial condition, but are able to
provide a matching investment from private, nongovernmental investors,
• required the approval of appropriate financial regulators when determining
whether an institution should receive a capital investment,92 and
• revised the benchmark against which changes in the amount of small business
lending is measured from the four full quarters immediately preceding the date of
enactment to calendar year 2007.93
Representative Patrick McHenry introduced H.R. 1387, the Small Business Lending Fund
Accountability Act of 2011, on May 2, 2011. It would have provided the Special Inspector
General for TARP responsibility for providing oversight over the SBLF.
Senator Tom Coburn proposed S.Amdt. 279 to S. 493, the Small Business Innovation Research,
Small Business Technology Transfer Reauthorization Act of 2011, on March 31, 2011. It would
have prevented TARP recipients from using funds received in any form under any other federal
assistance program, including the SBLF program.
Representative Cedric Richmond introduced H.R. 2807, the Small Business Leg-Up Act of 2011,
on August 5, 2011. It would have transferred any unobligated and repaid funds from the SBLF to
the Community Development Financial Institutions Fund beginning on the date when the
Secretary of the Treasury’s authority to make capital investments in eligible institutions expires
(on September 27, 2011). The bill’s stated intent was “to increase the availability of credit for
small businesses.”94
Representative John Carney introduced H.R. 3147, the Small Business Lending Extension Act, on
October 21, 2011. It would have extended the Treasury Department’s investment authority from
one year following enactment to two years and required the Treasury Secretary to provide any
institution not selected for participation in the program the reason for the rejection, ensure that the
rejection reason remains confidential, and establish an appeal process that provides the institution
an opportunity to contest the reason provided for the rejection of its application.

92 Current law requires the Treasury Secretary to consult with appropriate financial regulators to determine if the
eligible institution may receive a capital investment under the program. P.L. 111-240, the Small Business Jobs Act of
2010, §4103(d); 12 U.S.C. §4741.
93 Senator Snowe indicated that this change “would address concerns that the existing benchmark may be too low, by
historical standards, and that an adjustment could result in additional small business lending. See U.S. Senator Olympia
Snowe, “Snowe Calls for Comprehensive Fixes to Small Business Lending Fund,” Washington DC, March 30, 2011, at
http://snowe.senate.gov/public/index.cfm/pressreleases?ContentRecord_id=b1507369-8193-44ff-94ae-ceb94d5debe8&
ContentType_id=ae7a6475-a01f-4da5-aa94-0a98973de620&Group_id=2643ccf9-0d03-4d09-9082-3807031cb84a&
MonthDisplay=3&YearDisplay=2011.
94 H.R. 2807, the Small Business Leg-Up Act of 2011.
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During the 113th Congress, Representative Cedric Richmond introduced H.R. 2474, the
Community Lending and Small Business Jobs Act of 2013. It would, among other provisions,
transfer any unobligated and repaid funds from the SBLF to the Community Development
Financial Institutions Fund.95
Concluding Observations
The SBLF was enacted as part of a larger effort to enhance the supply of capital to small
businesses. Advocates argued that the SBLF would help to address the decline in small business
lending and create jobs. Opponents were not convinced that it would enhance small business
lending, and worried about the program’s potential cost to the federal treasury and its similarities
to TARP.
Participating institutions are reporting that they have increased their small business lending.
However, as has been discussed, questions have been raised concerning the validity of these
reported amounts. Specifically, as Treasury’s OIG argued in its August 2013 audit, more than one-
third of the reported lending gains occurred prior to September 30, 2011, the quarter in which
most SBLF participants received their SBLF funds; the reported small business lending gains
reflect all of the small business lending gains that the participants achieved, regardless of how the
loans were funded; and previous OIG audits “have shown that a large number of participants
misreport their small business lending activity.”96 In those previous audits, “50% or more of the
institutions reviewed submitted erroneous lending data to Treasury, either overstating or
understating their small business lending gains.”97
In addition to questions related to the validity of the reported small business lending gains, any
analysis of the program’s influence on small business lending is likely to be more suggestive than
definitive because differentiating the SBLF’s effect on small business lending from other factors,
such as changes in the lender’s local economy, is methodologically challenging, especially given

95 H.R. 2474 was introduced on June 20, 2013, and referred to the Committee on Financial Services, and, in addition, to
the Committees on Small Business, and Education and the Workforce, for a period to be subsequently determined by
the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee
concerned.
96 U.S. Department of the Treasury, Office of the Inspector General, Small Business Lending Fund: Reported SBLF
Program Accomplishments Are Misleading Without Additional Reporting
, August 29, 2013, pp. 3, 4, at
http://www.treasury.gov/about/organizational-structure/ig/Audit%20Reports%20and%20Testimonies/OIG-SBLF-13-
012%20fix%209%2010%2013.pdf.
97 Ibid., p. 4. Under the Small Business Jobs Act, the Department of the Treasury’s Inspector General is required to
conduct audits and investigations of the SBLF and to report its findings to Congress and the Secretary of the Treasury
no less than two times a year. To date, Treasury’s Inspector General has released nine SBLF reports (one informal and
eight formal). These reports examined and made recommendations for improving Treasury’s early investment decision
process for evaluating SBLF applicants (informal audit, May 13, 2011); Treasury’s SBLF cost and liabilities
projections (December 22, 2011); Treasury’s investment decisions concerning early-entry SBLF participants (February
17, 2012); Treasury’s investment decisions concerning later-entry SBLF participants (July 3, 2012); the accuracy of
SBLF participants’ reports of their baseline lending amounts (August 21, 2012); the accuracy of third quarter 2012
dividend rate adjustments (January 29, 2013); the accuracy of fourth quarter 2012 dividend rate adjustments (August 9,
2013); the accuracy of reported small business lending gains (August 29,2013); and the accuracy of first quarter 2013
dividend rate adjustments (September 27, 2013). To view the OIG’s audits see U.S. Department of the Treasury, Office
of the Inspector General, “Office of Small Business Lending Fund (SBLF) Oversight,” at http://www.treasury.gov/
about/organizational-structure/ig/Pages/Office-of-Small-Business-Lending-Fund-Program-Oversight.aspx. In addition,
the Government Accountability Office is required to audit the program annually.
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the relatively small amount of financing involved relative to the national market for small
business loans. The SBLF’s $4.0 billion in financing represents less than 0.7% of outstanding
small business loans (as defined by the FDIC).98
It is too early to fully address opponents’ concerns about the program’s potential cost. In
December 2010, before accepting any applicants, Treasury initially estimated that the SBLF could
cost taxpayers up to $1.26 billion (excluding administrative costs that were initially estimated at
about $26 million annually, but were $15.5 million in FY2012).99 It based that estimate with an
expectation that about $17 billion in SBLF financings would be disbursed. In October 2011,
Treasury estimated the program’s costs based on actual participant data. It estimated that the
SBLF will generate a savings of $80 million (excluding administrative costs), with the savings
coming primarily from a lower than expected financing level and, to a lesser extent,
improvements in projected default rates “due to higher participant quality than expected” and
lower market interest rates.100 Treasury issues a semi-annual report on SBLF costs. In its latest
semi-annual cost report, released on November 21, 2013, Treasury estimated that the SBLF will
“generate a lifetime positive return of $50 million,” excluding administrative costs.101
One issue that has arisen relative to the program’s projected cost is the non-cumulative treatment
of dividends. The Treasury’s Inspector General reported in May 2011 that
Under the terms set by legislation, dividend payments are non-cumulative, meaning that
institutions are under no obligation to make dividend payments as scheduled or to pay off
previously missed payments before exiting the program. This dividend treatment differs from
the TARP programs, in which many dividend payments were cumulative. This change in
dividend treatment was driven by changes in capital requirements mandated by the Collins
Amendment to the Dodd-Frank Act.
The amendment equalizes the consolidated capital requirements for Tier 1 capital of bank
holding companies by requiring that, at a minimum, regulators apply the same capital and
risk standards for FDIC-insured banks to bank holding companies. Under TARP, the FRB
[Federal Reserve Board] and FDIC treated capital differently at the holding company and
depository institution levels. The FRB treated cumulative securities issued by holding
companies as Tier 1 capital, while FDIC treated non-cumulative securities issued by
depository institutions as Tier 1 capital. In order to comply with the Dodd-Frank Act
requirement that securities purchased from holding companies receive the same capital

98 As of June 30, 2013, the FDIC reports that small business loans (defined by the FDIC as commercial and industrial
loans of $1 million or less) for non-agricultural purposes was $585.3 billion ($4 billion/$585.3 billion = 0.68%). See
Federal Deposit Insurance Corporation, “Statistics on Depository Institutions,” at http://www2.fdic.gov/SDI/main.asp.
99 Program administrative costs (e.g., monitoring the performance and compliance of participants, reporting on the
program’s performance and costs, and managing the securities purchased through the SBLF program) must be excluded
from subsidy cost estimates in accordance with guidelines in the Federal Credit Reform Act of 1990. See OMB
Circular A-11, §185.2. Also, see U.S. Department of the Treasury, “Cost report,” April 10, 2013, p. 2 at
http://www.treasury.gov/resource-center/sb-programs/DocumentsSBLFTransactions/
4106(2)%20SBLF%20Cost%20Report%20-%20April%202013%20-%20for%20transmittal.pdf.
100 U.S. Department of the Treasury, Office of the Inspector General, Small Business Lending Fund: Treasury Should
Consider Concerns Regarding Participants Management and Historical Retained Earnings When Estimating the Cost
of the SBLF Program
, December 22, 2011, pp. 1-3, at http://www.treasury.gov/about/organizational-structure/ig/
Agency%20Documents/Cost%20of%20SBLF%20Program%20-%20Final%20Report%20for%20Internet.pdf.
101 U.S. Department of the Treasury, “Cost report,” November 21, 2013, p. 3 at http://www.treasury.gov/resource-
center/sb-programs/DocumentsSBLFTransactions/4106(2)%20SBLF%20Cost%20Report%20-
%20November%202013.pdf.
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treatment as those purchased from depository institutions, Treasury made the dividends
under SBLF non-cumulative.
Additionally, given that Tier 1 capital must be perpetual and cannot have a mandatory
redemption date, the 10-year repayment period in the Small Business Jobs Act cannot be
enforced.102
Treasury addressed this issue by placing the following additional requirements and restrictions on
participants who miss dividend payments:
• the participant’s CEO [Chief Executive Office] and CFO [Chief Financial
Officer] must provide written notice regarding the rationale of the board of
directors (BOD) for not declaring a dividend,
• no repurchases may be affected and no dividends may be declared on any
securities for the applicable quarter and the following three quarters,
• after four missed payments (consecutive or not), the issuer’s BOD must certify in
writing that the issuer used best efforts to declare and pay dividends
appropriately,
• after five missed payments (consecutive or not), Treasury may appoint a
representative to serve as an observer on the issuer’s BOD, and
• after six missed payments (consecutive or not), Treasury may elect two directors
to the issuer’s BOD if the liquidation preference is $25 million or more.103
The Treasury’s Inspector General agreed that Treasury’s equity investment policy is consistent
with the legislation and that “it has reasonably structured the program to incentivize payment of
dividends.”104 However, it recommended that “Congress consider whether an amendment to the
Small Business Jobs Act and/or waiver from the Collins Amendment to the Dodd-Frank Act is
needed to make the repayment of dividends a requirement for exiting the program.”105
In conclusion, congressional oversight of the SBLF is currently focused on the program’s
potential long-term costs and effect on small business lending. Underlying those concerns are
fundamental disagreements concerning the best way to assist small businesses. Some advocate
the provision of additional federal resources to assist small businesses in acquiring capital
necessary to start, continue, or expand operations and create jobs. Others worry about the long-
term adverse economic effects of spending programs that increase the federal deficit. They
advocate business tax reduction, reform of financial credit market regulation, and federal fiscal
restraint as the best means to assist small businesses and create jobs.

102 U.S. Department of the Treasury, Office of the Inspector General, Small Business Lending Fund: Investment
Decision Process for the Small Business Lending Fund
, May 13, 2011, p. 19, at http://www.treasury.gov/about/
organizational-structure/ig/Documents/SBLF%20Report%20(OIG-SBLF-11-001).pdf.
103 Ibid., pp. 19, 20.
104 Ibid., p. 20.
105 Ibid., p. 25.
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Appendix. The SBLF’s Legislative History
The SBLF’s Legislative Origin
On March 16, 2009, President Obama announced the first SBLF-like proposal. Under that
proposal, the Department of the Treasury would have used TARP funds to purchase up to
$15 billion of SBA-guaranteed loans.106 The purchases were intended to “immediately unfreeze
the secondary market for SBA loans and increase the liquidity of community banks.”107 The plan
was dropped after it met resistance from lenders. Some lenders objected to TARP’s requirement
that participating lenders comply with executive compensation limits and issue warrants to the
federal government. Smaller, community banks objected to the program’s paperwork
requirements, such as the provision of a small-business lending plan and quarterly reports.108
In his January 2010 State of the Union address, President Obama proposed the creation of a
$30 billion SBLF to enhance access to credit for small businesses:
when you talk to small business owners in places like Allentown, Pennsylvania, or Elyria,
Ohio, you find out that even though banks on Wall Street are lending again, they’re mostly
lending to bigger companies. Financing remains difficult for small business owners across
the country, even those that are making a profit.
Tonight, I’m proposing that we take $30 billion of the money Wall Street banks have repaid
and use it to help community banks give small businesses the credit they need to stay
afloat.109
In response to the opposition community lenders had expressed concerning TARP’s restrictions in
2009, the Obama Administration proposed that Congress approve legislation authorizing the
transfer of up to $30 billion in TARP spending authority to the SBLF, and statutorily establish the
new program as distinct and independent from TARP and its restrictions.110 The Administration’s
legislative proposal was finalized and sent to Congress on May 7, 2010.111 Representative Barney

106 P.L. 110-343, the Emergency Economic Stabilization Act of 2008, was designed to enhance the supply of loans to
businesses of all sizes. The act authorized the Troubled Asset Relief Program (TARP) to “restore liquidity and stability
to the financial system of the United States” by purchasing or insuring up to $700 billion in troubled assets from banks
and other financial institutions. TARP’s purchase authority was later reduced from $700 billion to $475 billion by P.L.
111-203, the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Department of the Treasury has
disbursed $389 billion in TARP funds, including $337 million to purchase SBA 7(a) loan guaranty program securities.
The authority to make new TARP commitments expired on October 3, 2010. U.S. Department of the Treasury,
Troubled Assets Relief Program Monthly 105(a) Report—November 2010, December 10, 2010, pp. 2-4, at
http://www.treasury.gov/initiatives/financial-stability/briefing-room/reports/105/Documents105/
November%20105(a)%20FINAL.pdf. For further analysis, see CRS Report R41427, Troubled Asset Relief Program
(TARP): Implementation and Status
, by Baird Webel.
107 The White House, “Remarks by the President to Small Business Owners, Community Leaders, and Members of
Congress,” March 16, 2009, at http://www.whitehouse.gov/the_press_office/Remarks-by-the-President-to-small-
business-owners/.
108 Emily Flitter, “Fix for SBA Snagged by Tarp’s Exec Comp Limits,” American Banker, vol. 174, no. 61 (March 31,
2009), p. 1.
109 The White House, “Remarks by the President in State of the Union Address,” January 27, 2010, at
http://www.whitehouse.gov/the-press-office/remarks-president-state-union-address.
110 The White House, “President Obama Outlines New Small Business Lending Fund,” February 2, 2010, at
http://www.whitehouse.gov/the-press-office/president-obama-outlines-new-small-business-lending-fund.
111 The White House, “Remarks by the President on the Monthly Job Numbers,” May 7, 2010, at
(continued...)
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Frank, then-chair of the House Committee on Financial Services, introduced H.R. 5297, the Small
Business Lending Fund Act of 2010, on May 13, 2010.
The House Committee on Financial Services held a hearing on H.R. 5297 on May 18, 2010, and
passed it, as amended to include a State Small Business Credit Initiative, the following day. The
House passed the bill, as amended to include a Small Business Early-Stage Investment Program,
a Small Business Borrower Assistance Program, and some small business tax reduction
provisions, on June 17, 2010.
The House-Passed Version of the SBLF
Title I of the House-passed version of H.R. 5297 authorized the Secretary of the Treasury to
establish a $30 billion SBLF “to address the ongoing effects of the financial crisis on small
businesses by providing temporary authority to the Secretary of the Treasury to make capital
investments in eligible institutions” with total assets equal to or less than $1 billion or $10 billion
(as of the end of the fourth quarter of calendar year 2009) “in order to increase the availability of
credit for small businesses.”112 The authority to make capital investments in eligible institutions
was limited to one year after enactment.
Eligible financial institutions having total assets equal to or less than $1 billion as of the end of
the fourth quarter of calendar year 2009 could apply to receive a capital investment from the
SBLF in an amount not exceeding 5% of risk-weighted assets, as reported in the FDIC call report
immediately preceding the date of application. During the fourth quarter of 2009, 7,340 FDIC-
insured lending institutions reported having assets amounting to less than $1 billion.113
Eligible financial institutions having total assets equal to or less than $10 billion as of the end of
the fourth quarter of calendar year 2009 could apply to receive a capital investment from the fund
in an amount not exceeding 3% of risk-weighted assets, as reported in the FDIC call report
immediately preceding the date of application. During the fourth quarter of 2009, 565 FDIC-
insured lending institutions reported having assets of $1 billion to $10 billion.114
Risk-weighted assets are assets such as cash, loans, investments, and other financial institution
assets that have different risks associated with them. FDIC regulations (12 C.F.R. §567.6)
establish that cash and government bonds have a 0% risk-weighting; residential mortgage loans
have a 50% risk-weighting; other types of assets (such as small business loans) have a higher
risk-weighting.115

(...continued)
http://m.whitehouse.gov/the-press-office/remarks-president-monthly-jobs-numbers.
112 H.R. 5297, the Small Business Jobs and Credit Act of 2010, §101. Small Business Lending Fund Purpose. In 2011,
there were 7,513 FDIC-insured lending institutions in the United States. Of that number, 6,846 lending institutions had
assets amounting to less than $1 billion (totaling $1.42 trillion), 561 lending institutions had assets of $1 billion to $10
billion (totaling $1.43 trillion), and 106 lending institutions had assets greater than $10 billion (totaling $10.76 trillion).
See FDIC, “Quarterly Banking Profile: Second Quarter 2011,” at http://www2.fdic.gov/qbp/2011jun/qbp.pdf.
113 FDIC, “Quarterly Banking Profile: Fourth Quarter 2009,” at http://www2.fdic.gov/qbp/2009dec/qbp.pdf.
114 Ibid. In the fourth quarter of 2009, 107 FDIC-insured lending institutions had assets greater than $10 billion.
115 For further analysis of risk-weighted assets, see CRS Report R40249, Who Regulates Whom? An Overview of U.S.
Financial Supervision
, by Edward V. Murphy.
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Lending institutions on the FDIC problem bank list or institutions that have been removed from
the FDIC problem bank list for less than 90 days were ineligible to participate in the program.
Lending institutions could refinance securities issued through the Treasury Capital Purchase
Program (CPP) and the Community Development Capital Incentive (CDCI) program under
TARP, but only if the institution had not missed more than one dividend payment due under those
programs.
Participating banks would be charged a dividend rate of 5% per annum initially, with reduced
rates available if the bank increased its small business lending. For example, during any calendar
quarter in the initial two years of the capital investments under the program, the bank’s rate would
be lowered if it had increased its small business lending compared to the average small business
lending it made in the four previous quarters immediately preceding the enactment of the bill,
minus some allowable adjustments. A 2.5% to 5% increase in small business lending would have
lowered the rate to 4%, a 5% to 7.5% increase would have lowered the rate to 3%, a 7.5% to 10%
increase would have lowered the rate to 2%, and an increase greater than 10% would have
lowered the rate to 1%. Table A-1 shows the dividend rates associated with small business
lending increases by financial institutions under H.R. 5297. These rates were subsequently
included in the final law.
Table A-1. Small Business Lending Increases and Dividend Rates Under the
House-Passed Version of H.R. 5297
Small Business Lending Increase
Dividend Rate
10% or greater
1%
at least 7.5% but less than 10%
2%
at least 5% but less than 7.5%
3%
at least 2.5% but less than 5%
4%
Less than 2.5%
5%
No increase
7%
Source: H.R. 5297, the Smal Business Jobs and Credit Act of 2010, Section 103. Smal Business Lending Fund.
Note: The dividend rate would increase to 9% at the end of the five-year period that begins on the date of the
capital investment under the program. The Senate-passed version of H.R. 5297, which became the Smal Business
Jobs Act of 2010, authorizes the same dividend rates.
SBLF applicants were also required to submit a small business lending plan to the appropriate
federal banking agency and, for applicants that are state-chartered banks, to the appropriate state
banking regulator. The plan was to describe how the applicant’s business strategy and operating
goals will allow it to address the needs of small businesses in the areas it serves, as well as a plan
to provide linguistically and culturally appropriate outreach, where appropriate. The plan was to
be treated as confidential supervisory information. The Secretary of the Treasury was required to
consult with the appropriate federal banking agency or, in the case of an eligible institution that is
a non-depository community development financial institution, the Community Development
Financial Institution Fund, before determining if the eligible institution was to participate in the
program.116

116 If the appropriate banking agency would not otherwise recommend that the eligible institution receive the capital
investment, the Secretary of the Treasury was authorized, in consultation with the appropriate banking agency, to
(continued...)
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The bill specified that the SBLF would be “established as separate and distinct from the Troubled
Asset Relief Program established by the Emergency Economic Stabilization Act of 2008. An
institution shall not, by virtue of a capital investment under the Small Business Lending Fund
Program, be considered a recipient of the Troubled Asset Relief Program.”117
The bill also directed that all funds received by the Secretary of the Treasury in connection with
purchases made by the SBLF, “including interest payments, dividend payments, and proceeds
from the sale of any financial instrument, shall be paid into the general fund of the Treasury for
reduction of the public debt.”118
The Senate-Passed Version of the SBLF
Title IV of the Senate-passed version of H.R. 5297, which later became law, authorized the
Secretary of the Treasury to establish a $30 billion SBLF to make capital investments in eligible
community banks with total assets equal to or less than $1 billion or $10 billion. There were
several differences between the Senate-passed version of H.R. 5297’s SBLF provisions and the
SBLF provisions in the House-passed version of H.R. 5297. Specifically, the
• House-passed version of H.R. 5297 indicated that eligible institutions may be
insured depository institutions that are not controlled by a bank holding company
or a savings and loan holding company that is also an eligible institution and is
not directly or indirectly controlled by any company or other entity that has total
consolidated assets of more than $10 billion, bank holding companies, savings
and loan holding companies, community development financial institution loan
funds, and small business lending companies, all with total assets of $10 billion
or less (as of the end of 2009).119 The Senate-passed version of H.R. 5297 did not
provide eligibility to small business lending companies.120
• House-passed version of H.R. 5297 defined small business lending “as small
business lending as defined by and reported in an eligible institution’s quarterly
call report, where each loan comprising such lending is made to a small business
and is one the following types: (1) commercial and industrial loans; (2) owner-
occupied nonfarm, nonresidential real estate loans; (3) loans to finance
agricultural production and other loans to farmers; (4) loans secured by farmland;
(5) nonowner-occupied commercial real estate loans; and (6) construction, land
development and other land loans.”121 The Senate-passed version of H.R. 5297’s

(...continued)
consider allowing the eligible institution to participate in the program if the eligible institution provided matching
capital from private, non-governmental sources that is equal to or greater than 100% of the SBLF investment and that
matching capital was subordinate to the capital investment from the SBLF.
117 H.R. 5297, the Small Business Lending Fund Act of 2010, §111. Assurances.
118 H.R. 5297, the Small Business Lending Fund Act of 2010, §103. Small Business Lending Fund. Using a cost-based
estimate, the Congressional Budget Office estimated that the SBLF would result in net outlays of $3.3 billion over
2010-1015, and would reduce outlays by $1.1 billion over the 2010-2020 period. Using an alternative fair-value
estimate, the Congressional Budget Office estimated that the SBLF would result in net outlays of $6.2 billion over the
2010-2020 period. See U.S. Congressional Budget Office, “Cost Estimate: H.R. 5297, Small Business Lending Fund
Act of 2010,” June 28, 2010, pp. 3, 4, at http://www.cbo.gov/ftpdocs/115xx/doc11595/hr5297_HousePassed.pdf.
119 H.R. 5297, the Small Business Lending Fund Act of 2010, §102. Definitions.
120 P.L. 111-240, the Small Business Jobs Act of 2010, §4102. Definitions.
121 H.R. 5297, the Small Business Lending Fund Act of 2010, §102. Definitions.
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definition of small business lending did not include nonowner-occupied
commercial real estate or construction, land development and other land loans.122
• Senate-passed version of H.R. 5297 had an exclusion provision prohibiting
recipient lending institutions from using the funds to issue loans that have an
original amount greater than $10 million or that would be made to a business
with more than $50 million in revenues.123 The House-passed version of H.R.
5297 did not contain this provision.
• House-passed version of H.R. 5297 indicated that the incentives received in the
form of reduced dividend rates during the first 4.5-year period following the date
on which an eligible institution received a capital investment under the program
would be contingent on an increase in the number of loans made.124 If the number
of loans made by the institution did not increase by 2.5% for each 2.5% increase
of small business lending, then the rate at which dividends and interest would be
payable during the following quarter on preferred stock or other financial
instruments issued to the Treasury by the eligible institution would be (i) 5%, if
this quarter is within the two-year period following the date on which the eligible
institution received the capital investment under the program; or (ii) 7%, if the
quarter is after the two-year period. The Senate-passed version of H.R. 5297 did
not contain this legislative language.
• House-passed version of H.R. 5297 included an alternative computation
provision that would have allowed eligible institutions to compute their small
business lending amounts for incentive purposes as if the definition of their small
business lending amounts did not require that the loans comprising such lending
be made to small business.125 This alternative computation would have been
allowed if the eligible institution certified that all lending included by the
institution for purposes of computing the increase in lending was made to small
businesses. The Senate-passed version of H.R. 5297 did not contain this
provision.
• House-passed version of H.R. 5297 indicated that an eligible institution that is a
community development loan fund may apply to receive a capital investment
from the SBLF in an amount not exceeding 10% of total assets, as reported in the
audited financial statements for the fiscal year of the eligible institution that
ended in calendar year 2009.126 The Senate-passed version of H.R. 5297 specifies
5%.127
• House-passed version of H.R. 5297 would have required the Secretary of the
Treasury, in consultation with the Community Development Financial
Institutions Fund, to develop eligibility criteria to determine the financial ability
of a Community Development Loan Fund to participate in the program and repay
the investment. It provided a list of recommended eligibility criteria that the

122 P.L. 111-240, the Small Business Jobs Act of 2010, §4102. Definitions.
123 H.R. 5297, the Small Business Lending Fund Act of 2010, §103. Small Business Lending Fund.
124 Ibid.
125 Ibid.
126 Ibid.
127 P.L. 111-240, the Small Business Jobs Act of 2010, §4103. Small Business Lending Fund.
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Secretary of the Treasury could use for this purpose.128 The Senate-passed
version of H.R. 5297 provided a similar, but mandatory, list of eligibility criteria
that must be used for this purpose.129
• House-passed version of H.R. 5297 contained a temporary amortization authority
provision which would have allowed an eligible institution to amortize any loss
or write-down on a quarterly straight-line basis over a period of time, adjusted to
reflect the institution’s change in the amount of small business lending relative to
the baseline.130 The Senate-passed version of H.R. 5297 did not contain this
provision.
The Senate’s version of H.R. 5297 was agreed to in the Senate on September 16, 2010, after
considerable debate and amendment to remove the Small Business Early-Stage Investment
Program and Small Business Borrower Assistance Program, revise the SBLF, and add numerous
other provisions to assist small businesses, including additional small business tax reduction
provisions.131 The House agreed to the Senate amendments on September 23, 2010, and President
Obama signed the bill, retitled the Small Business Jobs Act of 2010 (P.L. 111-240), into law on
September 27, 2010.

Author Contact Information

Robert Jay Dilger

Senior Specialist in American National Government
rdilger@crs.loc.gov, 7-3110



128 H.R. 5297, the Small Business Lending Fund Act of 2010, §103. Small Business Lending Fund.
129 P.L. 111-240, the Small Business Jobs Act of 2010, §4103. Small Business Lending Fund.
130 H.R. 5297, the Small Business Lending Fund Act of 2010, §113. Temporary Amortization Authority.
131 For additional information and analysis concerning P.L. 111-240, the Small Business Jobs Act of 2010, see CRS
Report R40985, Small Business: Access to Capital and Job Creation, by Robert Jay Dilger.
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