The Small Business Lending Fund
Updated June 18, 2020
Congressional Research Service
https://crsreports.congress.gov
R42045

The Small Business Lending Fund

Summary
Congressional interest in smal business access to capital has increased in recent years because of
concerns that smal businesses might be prevented from accessing sufficient capital to enable
them to start, continue, or expand operations and create jobs. Some have argued that the federal
government should provide additional resources to assist smal businesses. 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 smal businesses and create jobs.
Several laws were enacted during the 111th Congress to enhance smal business access to capital.
For example,
 P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (ARRA),
provided the Smal Business Administration (SBA) an additional $730 mil ion,
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 Smal Business Jobs Act of 2010, authorized the Secretary of
the Treasury to establish a $30 bil ion Smal Business Lending Fund (SBLF), in
which $4 bil ion was issued, to encourage community banks with less than $10
bil ion in assets to increase their lending to smal businesses. It also authorized a
$1.5 bil ion State Smal Business Credit Initiative to provide funding to
participating states with smal 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 bil ion in tax
relief for smal 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 smal
business loans. The SBLF’s advocates claimed the SBLF was needed to enhance the supply of
smal business loans. The report then examines other arguments presented both for and against
the program. Advocates argued that the SBLF would increase lending to smal businesses and, in
turn, create jobs. Opponents contended that the SBLF could lose money, lacked sufficient
oversight provisions, did not require lenders to increase their lending to smal businesses, could
serve as a vehicle for Troubled Asset Relief Program (TARP) recipients to effectively refinance
their TARP loans on more favorable terms with little or no resulting benefit for smal 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
bil s introduced 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 Smal 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 smal businesses.” H.R. 3147, the Smal Business Lending Extension
Act, would have extended the Department of the Treasury’s investment authority from one year
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The Small Business Lending Fund

to two years. During the 113th Congress, H.R. 2474, the Community Lending and Smal Business
Jobs Act of 2013, would have transferred any unobligated and repaid funds from the SBLF to the
Community Development Financial Institutions Fund.
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Contacts
Author Information ....................................................................................................... 33

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The Small Business Lending Fund

Small Business Access to Capital
Congressional interest in smal business access to capital has increased in recent years because of
concerns that smal businesses might be prevented from accessing sufficient capital to enable
them to start, continue, or expand operations and create jobs.1 Smal businesses 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, smal businesses (defined for this purpose as having fewer
than 500 employees) increased their net employment in the first year after the recession, whereas
larger businesses continued to experience declines in employment.3 During the Great Recession
(December 2007-June 2009), smal businesses accounted for almost 60% of net job losses.4 From
the end of the recession through the end of FY2012, smal businesses accounted for about 63% of
net new jobs, close to their historical average share of net new job creation.5 Since then, smal
businesses have added about 64% of net new jobs.6
Some have argued that the federal government should provide additional resources to assist smal
businesses. 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 smal businesses and
create jobs.
Several laws were enacted during the 111th Congress to enhance smal business access to capital.
For example,
 P.L. 111-5, the American Recovery and Reinvestment Act of 2009 (ARRA),
provided the Smal Business Administration (SBA) an additional $730 mil ion,
including $375 mil ion to temporarily subsidize SBA fees and increase the 7(a)
loan guaranty program’s maximum loan guaranty percentage from 85% on loans

1 T he United States does not have a statutory definition for medium-sized or large businesses. A business concern can
either be considered sm all or not sm all 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.” T he Small Business Administration (SBA) has established two widely used size
standards: 500 employees for most manufacturing and mining industries and $7 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. T he SBA’s size standards may be found at 13 C.F.R. §121.201.
For additional information and analysis, see CRS Report R40860, Sm all Business Size Standards: A Historical Analysis
of Contem porary 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 workers to 250 workers, and large businesses
as those with more than 250 employees. See European Commission, “ Small and Medium Sized Enterprises: What is an
SME?” at http://ec.europa.eu/growth/smes/business-friendly-environment/sme-definition_en.
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 (SBA), 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.
4 SBA, “T he Small Business Economy, 2010: A Report to the President ,” pp. 2, 5, 21, 22, at https://www.sba.gov/sites/
default/files/sb_econ2010.pdf; and SBA, Fiscal Year 2010 Congressional Budget Justification , p. 1, at
https://www.sba.gov/sites/default/files/aboutsbaarticle/Congressional_Budget_Justification_2010.pdf.
5 SBA, Office of Advocacy, “Small Business Employment: Fourth Quarter 2013,” Quarterly Employment Bulletin,
February 6, 2014, p. 1, at https://www.sba.gov/sites/default/files/Quarterly_Employment_Bulletin_4q2013%20.pdf.
6 SBA, Office of Advocacy, “Small Business Economic Bulletin: April 2020,” at https://cdn.advocacy.sba.gov/wp-
content/uploads/2020/04/30103025/April-2020-Econ-Bulletin.pdf.
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of $150,000 or less and 75% on loans exceeding $150,000 to 90% for al regular
7(a) loans.
 P.L. 111-240, the Smal Business Jobs Act of 2010, authorized the Secretary of
the Treasury to establish a $30 bil ion Smal Business Lending Fund (SBLF) ($4
bil ion was issued) to encourage community banks with less than $10 bil ion in
assets to increase their lending to smal businesses. It also authorized a $1.5
bil ion State Smal Business Credit Initiative to provide funding to participating
states with smal 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 bil ion in tax relief for smal
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 bil ion in the hands of smal 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 smal
business loans. After describing the program’s structure, the report then examines arguments that
were presented both for and against the program’s enactment.
The report concludes with an examination of the SBLF’s implementation by the Department of
the Treasury and a discussion of bil s introduced during recent 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, 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
Smal 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 smal businesses.”8 H.R. 3147, the Smal Business Lending Extension Act, would have,
among other provisions, extended the Department of the Treasury’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 Smal Business Jobs Act of 2013, would have transferred any
unobligated and repaid funds from the SBLF to the Community Development Financial
Institutions Fund.

7 SBA, “Jobs Act Supported More T han $12 Billion in SBA Lending to Small Businesses in Just T hree Months,”
January 3, 2010, at https://www.sba.gov/content/jobs-act-supported-more-12-billion-sba-lending-small-businesses-just-
three-months.
8 H.R. 2807, the Small Business Leg-Up Act of 2011.
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Two 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 smal
business loans. For example, the survey includes a question concerning their bank’s credit
standards for smal 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 smal firms (defined as
having annual sales of less than $50 mil ion) changed?” The senior loan officers are asked to
indicate if their bank’s credit standards have “Tightened considerably,” “Tightened somewhat,”
“Remained basical y 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”
indicates the market’s supply of smal business loans.
As shown in Figure 1, senior loan officers reported that they general y tightened smal business
loan credit standards from 2007 through late 2009. Since 2009, smal business credit markets
have general y improved, with some tightening in 2016, 2019, and 2020.
The survey also includes a question concerning the demand for smal business loans: “Apart from
normal seasonal variation, how has demand for C&I loans changed over the past three months for
smal firms (annual sales of less than $50 mil ion)?” Senior loan officers are asked to indicate if
demand was “Substantial y stronger,” “Moderately stronger,” “About the same,” “Moderately
weaker,” or “Substantial y weaker.” Subtracting the percentage of respondents reporting
“Moderately weaker” and “Substantial y weaker” from the percentage of respondents reporting
“Substantial y stronger” and “Moderately stronger” indicates the market’s demand for smal
business loans.
As shown in Figure 1, senior loan officers reported that the demand for smal business loans
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 during the latter half of 2011, general y increased from 2012 through 2015, and has
varied somewhat, increasing in some quarters and declining in others, since then.9

9 Federal Reserve Board, “Senior Loan Officer Opinion Survey on Bank Lending Practices,” at
http://www.federalreserve.gov/boarddocs/SnLoanSurvey/.
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Figure 1. Small Business Lending Environment, 2007-2020
(senior loan of icers’ survey responses)

Sources: 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 Smal Business Credit,” The Smal Business Advocate, vol. 28, no. 10 (December 2009), p. 3, at
https://www.sba.gov/sites/default/files/advocacy/The%20Smal %20Business%20Advocate%20-
%20December%202009.pdf.
Federal Deposit Insurance Corporation: Outstanding Loan Balance
The Federal Deposit Insurance Corporation (FDIC) has maintained comparable smal business
lending data for the second quarter (June 30) of each year since 2002. Figure 2 shows the amount
of outstanding smal business loans (defined by the FDIC as commercial and industrial loans of
$1 mil ion or less) for nonagricultural purposes as of June 30 of each year from 2007 to 2019. As
shown in Figure 2, the amount of outstanding smal business loans for nonagricultural purposes
increased from June 30, 2007, to June 30, 2008, declined over the next several years, and has
increased each year since June 30, 2013.
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Figure 2. Outstanding Small Business Loans, NonAgricultural Purposes, 2007-2019
(bil ions of dol ars)

Source: Federal Deposit Insurance Corporation, “Statistics on Depository Institutions,” at
https://www7.fdic.gov/sdi/main.asp?formname=standard.
Notes: Data as of June 30 each year.
Although changes in smal business outstanding debt are not necessarily a result of changes in the
supply of smal business loans, many, including the SBA, view a decline in smal business
outstanding debt as a signal that smal businesses might be experiencing difficulty accessing
sufficient capital to enable them to lead job growth.
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 smal business lending, several factors contributed to
the decline in smal business lending from 2007 to 2010.10 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 smal business borrowers, some of whom had relied on home equity loans to finance their
smal businesses during the real estate boom. The authors concluded that the absence of this
additional source of collateral may have contributed to a decline in lending to smal businesses.11
They also argued that many smal 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, especial y among smal business start-ups, which are general y considered
among the most risky investments.12 The authors argued that

10 George W. Haynes and Victoria Williams, Lending by Depository Lenders to Small Businesses, 2003 to 2010, SBA,
Office of Advocacy, March 2011, at https://www.sba.gov/sites/default/files/rs380tot.pdf (hereafter Haynes and
Williams, Lending by Depository Lenders to Sm all Busin esses, 2003 to 2010).
11 Haynes and Williams, Lending by Depository Lenders to Small Businesses, 2003 to 2010 , p. 25.
12 Haynes and Williams, Lending by Depository Lenders to Small Businesses, 2003 to 2010 , p. 26. One possible
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 in this newly regulated market, smal er 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 smal
businesses and others; and
 the relative difficulty in assessing creditworthiness due to the lack of information
about potential financial performance is very high in smal business lending,
especial y in financial markets driven by factor—rather than relationship—
lending. Therefore, one would expect the smal business loan market to recover
more slowly than other financial markets.13
The authors also noted that FDIC data indicated that smal business lending had not only declined
in absolute terms (the total amount of dollars borrowed and the total number of smal business
loans issued), but in relative terms as wel (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, smal
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 2010.14
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 smal business lending, the
demand for smal business loans fel during the recession primarily because many smal
businesses experienced a decline in sales and many smal business owners had a heightened level
of uncertainty concerning future sales. The study’s authors argued that given smal business
owners’ lack of confidence in the demand for their goods and services, many of them decided to
save capital instead of hiring additional employees and borrowing capital to invest in business
expansions and inventory.15
Smal business owners’ responses to a monthly survey by the National Federation of Independent
Business Research Foundation (NFIB) concerning their views of the economy support the
argument that declining sales contributed to the reduced demand for smal business loans. From
2008 through 2011, smal business owners responding to the NFIB surveys 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 1986.16 Also, employment data suggest

contributing factor for at least some lenders becoming more cautious is that in recent years many lenders experienced
an increase in nonperforming loans and a depletion of their loan loss reserves, limiting the funds available for lending
to small businesses.
13 Haynes and Williams, Lending by Depository Lenders to Small Businesses, 2003 to 2010 , p. 26.
14 Haynes and Williams, Lending by Depository Lenders to Small Businesses, 2003 to 2010 , p. 25.
15 Haynes and Williams, Lending by Depository Lenders to Small Businesses, 2003 to 2010 .
16 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., Sm all Business Credit in a Deep Recession (Washington, DC: NFIB Research Foundation, June 2008), p. 1,
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that smal businesses were particularly hard hit by the recession. As mentioned previously, smal
businesses accounted for almost 60% of the net job losses during the December 2007-June 2009
recession.17
According to testimony by the Secretary of the Treasury before the House Smal Business
Committee on June 22, 2011, smal businesses were especial y hard hit by the recession because
[s]mall 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.18
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 smal
business loans was adopted. For example, Congress provided more than $1.1 bil ion to
temporarily subsidize fees for the SBA’s 7(a) and 504/Certified Development Company
(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 al regular 7(a) loans (funding was exhausted on January 3, 2011).19 The fee subsidies were
designed to increase the demand for smal business loans by reducing the cost of borrowing. The
90% loan guarantee was designed to increase the supply of smal business loans by reducing the
risk of lending.

at https://www.nfib.com/Portals/0/PDF/AllUsers/research/studies/Small-Business-Credit-In-a-Deep-Recession-
February-2010-NFIB.pdf.
17 SBA, “T he Small Business Economy, 2010: A Report to the President,” pp. 2, 5, 21, 22, at https://www.sba.gov/
sites/default/files/sb_econ2010.pdf; and SBA, Fiscal Year 2010 Congressional Budget Justification , p. 1, at
https://www.sba.gov/sites/default/files/aboutsbaarticle/Congressional_Budget_Justification_2010.pdf.
18 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.
19 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
T emporary 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,
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 T ransportation 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.
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Congress also provided the SBA additional resources to expand its lending to smal businesses.
For example, ARRA included a $255 mil ion temporary, two-year smal business stabilization
program to guarantee loans of $35,000 or less to smal 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 mil ion for the
SBA’s surety bond program and a temporary increase in that program’s maximum bond amount
from $2 mil ion to $5 mil ion and up to $10 mil ion under certain conditions (the higher
maximum bond amounts ended on September 30, 2010); an additional $6 mil ion for the SBA’s
Microloan program’s lending program and an additional $24 mil ion for the Microloan program’s
technical assistance program; and increased the funds (leverage) available to SBA-licensed Smal
Business Investment Companies (SBICs) to no more than 300% of the company’s private capital
or $150 mil ion, whichever is less.20
Several other programs were also enacted during the 111th Congress to increase the supply of
smal 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 “Systemical y Important Secondary Market
(SISM) Broker-Dealers” that would use the loan funds to purchase SBA-guaranteed loans from
commercial lenders, assemble them into pools, and sel them to investors in the secondary loan
market.
P.L. 111-240 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).21 The act also increased the loan guarantee limits for the SBA’s 7(a) program from $2
mil ion to $5 mil ion, and for the 504/CDC program from $1.5 mil ion to $5 mil ion for “regular”
borrowers, from $2 mil ion to $5 mil ion if the loan proceeds are directed toward one or more
specified public policy goals, and from $4 mil ion to $5.5 mil ion 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 mil ion to $5
mil ion. In addition, it temporarily increased for one year (through September 26, 2011) the SBA
7(a) Express Program’s loan limit from $350,000 to $1 mil ion. The act also authorized the
Secretary of the Treasury to establish the $30 bil ion SBLF and a $1.5 bil ion State Smal
Business Credit Initiative to provide funding to participating states with smal business capital
access programs.
The SBLF
The SBLF was designed “to address the ongoing effects of the financial crisis on smal 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 smal businesses.”22 The

20 P.L. 111-5, the American Recovery and Reinvestment Act of 2009, §505, Increasing Small Business Investment.
21 SBA, Office of Congressional and Legislative Affairs, “Correspondence with the author,” January 4, 2010.
22 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 https://www.fdic.gov/bank/analytical/quarterly/2011-vol5-3/fdic-quarterly-vol5no3.pdf.
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SBLF’s legislative history, including differences in the House- and Senate-passed versions of the
program, appears in the Appendix.
P.L. 111-240 authorized the Secretary of the Treasury to make up to $30 bil ion in capital
investments in eligible institutions with total assets equal to or less than $1 bil ion or $10 bil ion
(as of the end of the fourth quarter of calendar year 2009).23 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 bil ion 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 cal report
immediately preceding the application date. During the fourth quarter of 2009, 7,340 FDIC-
insured lending institutions reported having assets amounting to less than $1 bil ion.24
Eligible financial institutions with total assets of $10 bil ion or less 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 cal report
immediately preceding the application date. During the fourth quarter of 2009, 565 FDIC-insured
lending institutions reported having assets of $1 bil ion to $10 bil ion.25
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; and other types of assets (such as smal business loans) have a higher
risk-weighting.26
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. A
lending institution can refinance securities issued through the Treasury Capital Purchase Program
(CPP) and the Community Development Capital Incentive (CDCI) program under TARP, but only
if that institution had not missed more than one dividend payment due under those programs.
Dividend Rates
Participating banks (C corporations and savings associations) are charged a dividend rate of no
more than 5% per annum initial y, with reduced rates available if the bank increases its smal
business lending by specified amounts.27 For example, during any calendar quarter in the initial

23 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 hol ding 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).
24 FDIC, “Quarterly Banking Profile: Fourth Quarter 2009,” at https://www.fdic.gov/bank/analytical/quarterly/2010-
vol4-1/fdic-quarterly-vol4no1-full.pdf.
25 FDIC, “Quarterly Banking Profile: Fourth Quarter 2009.” In the fourth quarter of 2009, 107 FDIC-insured lending
institutions had assets greater than $10 billion.
26 For further analysis of risk-weighted assets, see CRS Report R44918, Who Regulates Whom? An Overview of the
U.S. Financial Regulatory Fram ework, by Marc Labonte.
27 “On the Investment Date, and at the beginning of each of the next ten calendar quarters thereafter, the amount of
Qualified Small Business Lending reported by the Issuer in the most recent Supplemental Report will be compared to
the Baseline amount of Qualified Small Business Lending. T he dividend rate will be adjusted to reflect the amount of
an Issuer’s change in Qualified Small Business Lending from the Baseline.” See U.S. Department of the T reasury,
“Small Business Lending Fund: Senior Preferred Stock,” p. 4, at http://www.treasury.gov/resource-center/sb-
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two years of the capital investments under the program, the bank’s dividend rate is lowered if it
increases its smal business lending, as reported in its FDIC cal reports, compared with the
average smal business lending it made in the four previous quarters immediately preceding the
law’s enactment, minus some al owable adjustments.28
Table 1 shows the dividend rates associated with smal business lending increases by C
corporation banks and savings associations.
Table 1. SBLF Lending Increases and Dividend Rates for C Corporation Banks and
Savings Associations

Dividend Rate Following Investment Date
After Year 4.5
Small Business Lending
Quarter 10 to
(following Q1 of
Increase
1st 9 Quarters
Year 4.5
2016)
10% or greater
1%
1%
9%
At least 7.5% but less than
2%
2%
9%
10%
At least 5% but less than 7.5%
3%
3%
9%
At least 2.5% but less than 5%
4%
4%
9%
Less than 2.5%
5%
5%
9%
No increase
5%
7%
9%
Source: P.L. 111-240, the Smal Business Jobs Act of 2010, Section 4103. Smal Business Lending Fund; and U.S.
Department of the Treasury, “Smal Business Lending Fund: Getting Started Guide for Community Banks,” p. 1,
at http://www.treasury.gov/resource-center/sb-programs/Documents/SBLF%20Getting%20Started%20Guide.pdf.
Table 2 shows the dividend rates associated with smal business lending increases by
participating S corporation banks and mutual lending institutions. These rates are slightly higher
than those for C corporation banks and savings associations “to reflect after-tax effective rates
equivalent to the dividend rate paid by other classes of institutions participating in the Fund
through the issuance of preferred stock.”29 As wil be discussed later, an S corporation does not
pay federal taxes at the corporate level. Any business income or loss is “passed through” to
shareholders, who report it on their personal income tax returns.

programs/Documents/SBLF%20Refinancing%20T erm%20Sheet.pdf.
28 T he 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.
29 U.S. Department of the T reasury, “Overview for Subchapter S Corporations and Mutual Institutions,” at
http://www.treasury.gov/resource-center/sb-programs/Pages/Overview-for-S-Corporation-Banks-and-Mutual-
Institutions.aspx.
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Table 2. SBLF Lending Increases and Dividend Rates for S Corporation Banks and
Mutual Lending Institutions

Dividend Rate Following Investment Date
After Year 4.5
Small Business Lending
Quarter 10 to
(following Q1 of
Increase
1st 9 Quarters
Year 4.5
2016)
10% or greater
1.5%
1.5%
13.8%
At least 7.5% but less than
3.1%
3.1%
13.8%
10%
At least 5% but less than 7.5%
4.6%
4.6%
13.8%
At least 2.5% but less than 5%
6.2%
6.2%
13.8%
Less than 2.5%
7.7%
7.7%
13.8%
No increase
7.7%
10.8%
13.8%
Source: P.L. 111-240, the Smal Business Jobs Act of 2010, Section 4103. Smal Business Lending Fund; U.S.
Treasury, “Smal Business Lending Fund: Subchapter S Corporation Senior Securities,” p. 4, at
http://www.treasury.gov/resource-center/sb-programs/Docu ments/SBLF_S_Corporation_Term_Sheet_05-02-
11.pdf; and U.S. Treasury, “Smal Business Lending Fund: Mutual Institutions Senior Securities,” p. 4,
http://www.treasury.gov/resource-center/sb-programs/Docu ments/
SBLF%20Mutual%20Institutions%20Term%20Sheet.pdf.
Community Development Financial Institutions (CFDIs) are provided funding for an initial eight
years with an automatic rollover for two additional years at the issuer’s option. On the 10th
anniversary of the investment date the issuer repays the principal amount, together with al
accrued and unpaid interest. Additional y, the dividend rate is 2% per annum for the first eight
years from the investment date (payable quarterly in arrears on January 1, April 1, July 1, and
October 1 of each year) and 9% thereafter.30
Lending Plan Requirement
SBLF applicants are required to submit a smal 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 wil
al ow it to address the needs of smal businesses in the areas it serves, as wel as to provide
linguistical y and cultural y appropriate outreach, where appropriate. The plan is treated as
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 nondepository
community development financial institution, the Community Development Financial Institution
Fund, before determining if the eligible institution may participate in the program.31

30 U.S. Department of the T reasury, “ Small Business Lending Fund: Community Development Financial Institution
Loan Funds Equity Equivalent Capital,” p. 3, at http://www.treasury.gov/resource-center/sb-programs/Documents/
SBLF-CDLF%20T erm%20Sheet.pdf.
31 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, nongovernmental sources that is equal to or greater than 100% of the SBLF investment and if that
matching capital is subordinate to the capital investment from the SBLF.
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The act directed that al 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, shal be paid into the general fund of the Treasury for
reduction of the public debt.”32
Arguments For and Against the SBLF
The SBLF’s advocates argued that it would create jobs by encouraging lenders, especial y those
experiencing liquidity problems (access to cash and easily tradable assets),33 to increase their
lending to smal businesses. For example, the House report accompanying H.R. 5297, the Smal
Business Lending Fund Act of 2010, argued that the SBLF was needed to enhance smal
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.34
A dissenting view, endorsed by the House Committee on Financial Services’ minority members,
was included in the report. This view argued that the SBLF does not properly deal with the lack
of financing for smal 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 actualy
require increased lending. A more effective response to the challenges facing America’s

32 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 (CBO) estimated that the SBLF would result in net outlays of $3.3 billion
over 2010-2015 and would reduce outlays by $1.1 billion over the 2010 -2020 period. Using an alternative fair-value
estimate, CBO estimated that the SBLF would result in net outlays of $6.2 billion over the 2010 -2020 time period. See
CBO, “ Cost Estimate: H.R. 5297, Small Business Lending Fund Act of 2010,” June 28, 2010, pp. 3, 4, at
https://www.cbo.gov/sites/default/files/111th-congress-2009-2010/costestimate/hr5297housepassed0.pdf.
33 For further information and analysis concerning lender liquidity issues, see CRS Report R43413, Costs of
Governm ent Interventions in Response to the Financial Crisis: A Retrospective, by Baird Webel and Marc Labonte.
34 H.Rept. 111-499, T o Create the Small Business Lending Fund Program to Direct the Secretary of the T reasury to
Make Capital Investments in Eligible Institutions in order to In crease the Availability of Credit for Small Businesses,
and for other purposes, p. 16.
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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.35
Opponents also argued that even if the SBLF were 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.”36 They contended that the bil did not provide sufficient oversight for
effectively monitoring the program because the Inspector General of the Department of the
Treasury, who was given that oversight responsibility under the bil , “might not be able to direct
sufficient attention to this task given its other responsibilities.”37 They argued that the Special
Inspector General of TARP would be in a better position to provide effective oversight of the
program.38
These arguments and others were presented during House floor debate on the bil . For example,
Representative Melissa Bean advocated the bil ’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
[Congressional Budget Office] 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.
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.39
Representative Nydia Velázquez, then-chair of the House Committee on Smal Business, added
that the legislation had sufficient safeguards in place to ensure that the funds were targeted at
smal 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.

35 H.Rept. 111-499, p. 37.
36 H.Rept. 111-499, pp. 37, 38.
37 H.Rept. 111-499, p. 38.
38 H.Rept. 111-499, p. 38.
39 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.
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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.40
Representative Velázquez added “let me just make it clear … CBO estimates that [the SBLF] wil
save taxpayers $1 bil ion over 10 years, as banks are expected to pay back this loan over 10 years,
with interest.”41
Representative Randy Neugebauer opposed the bil ’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 smal
business lending.”
This bill allows for another $33 billion in spending that will be added to th e 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.42
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 bil . Advocates argued that the SBLF would encourage higher levels
of smal 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 smal business.”43 She added that as chair of the
Senate Committee on Smal 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

40 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.
41 Representative Nydia Velázquez, “Consideration of the Small Business Jobs and Credit Act of 2 010,” p. H4518.
42 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.
43 Senator Mary Landrieu, “Small Business Lending,” remarks in the Senate, Congressional Record, daily edition, vol.
156, no. 108 (July 21, 2010), p. S6070.
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… [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.44
Opponents argued that the SBLF could lose money, lacked sufficient oversight provisions, did not
require lenders to increase their lending to smal businesses, could serve as a vehicle for TARP
recipients to effectively refinance their TARP loans on more favorable terms with little or no
resulting benefit for smal 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 bil 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 bil ion 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 bil ion.45 Senator Snowe
also argued that the bipartisan Congressional Oversight Panel for TARP stated in its May 2010
oversight report that the proposed SBLF “substantial y resembles” the TARP and “is a bank-
focused capital infusion program that is being contemplated despite little, if any, evidence that
such programs increase lending.”46 Senator Snowe noted that she regretted “that we are in a
position where we have not been able to reach agreement al owing the minority to offer
amendments, which is confounding and perplexing as wel as disappointing.”47 Senator Snowe
later added that the SBLF’s incentives to encourage lending to smal businesses also “could
encourage unnecessarily risky behavior by banks … to avoid paying higher interest rates.”48
Opponents also questioned the SBLF’s use of quarterly cal report data as submitted by lenders to
their appropriate banking regulator to determine what counts as a smal business loan.49 Cal
report data denotes loans of $1 mil ion or less as smal 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 smal business lending in the SBLF covers an entirely different set of smal businesses
than those that fal within the definition set out in the Smal Business Act or used by the SBA.”50
The Senate’s version of H.R. 5297 was agreed to on September 16, 2010, by a vote of 68-38.51
The House agreed to the Senate-passed version of H.R. 5297 on September 23, 2010, by a vote of

44 Senator Mary Landrieu, “Small Business Lending,” p. S6071.
45 Senator Olympia Snowe, “Small Business Lending,” remarks in the Senate, Congressional Record, daily edition, vol.
156, no. 108 (July 22, 2010), p. S6158.
46 Senator Olympia Snowe, “Small Business Lending,” p. S6158.
47 Senator Olympia Snowe, “Small Business Lending,” p. S6156.
48 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), p. S7157.
49 T he 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.
50 Representative Sam Graves, “Full Committee Hearing, T he State of Small Business Access to Credit and Capital:
T he View from Secretary Geithner,” Letter to Members of the House Small Business Committee, Washington, DC,
June 20, 2011, p. 19.
51 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.
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237-187, and the bil , retitled the Smal 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.
The budget anticipated that the SBLF would provide $17.399 bil ion in financings, wel below its
authorized amount of $30 bil ion.52 This was the first indication that the SBLF’s implementation
may not proceed as expected.53 The second such indication was an unanticipated delay in writing
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.54
The first financing took place on June 21, 2011, about nine months after the program’s
enactment. The delay was largely due to Treasury’s need to finalize the SBLF’s investment
decision process with federal banking agencies55 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.56 The majority of insured depository
institutions, bank holding companies, and savings and loan holding companies are C
corporations.57 A Subchapter S corporation refers to a section of the Internal Revenue Code (IRC)

52 U.S. Office of Management and Budget, Budget of the United States Government, Fiscal Year 2012, Appendix:
Departm ent of the Treasury, p. 989, at https://www.gpo.gov/fdsys/pkg/BUDGET -2012-APP/pdf/BUDGET -2012-
APP.pdf.
53 T he Department of the T reasury based its forecast on an “analysis of demand for the program.” See U.S. Department
of the T reasury, “ FY2012 Congressional Justification, Small Business Lending Fund,” p. 7, at http://www.treasury.gov/
about/budget-performance/Documents/CJ_FY2012_SBLF_508.pdf.
54 Representative Sam Graves, “Graves Questions T reasury Secretary T imothy Geithner on Access to Capital for Small
Businesses,” press release, June 22, 2011; 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 Im prove Transparency and Accountability, GAO-12-183,
December 14, 2011, at http://www.gao.gov/products/GAO-12-183.
55 T reasury and the federal banking agencies ultimately agreed that the banking agencies “would advise T reasury 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 T ARP. It was agreed that an applicant would be con sidered “ 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 T reasury’s loss from making an investment in the institution.” See U.S. Department of the T reasury, Office of
the Inspector General. Sm all Business Lending Fund: Investm ent Decision Process for the Sm all 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.
56 Internal Revenue Service, “ T ax Information for Corporations,” at https://www.irs.gov/corporations.
57 U.S. Department of the T reasury, Office of the Inspector General. Small Business Lending Fund: Investment
Decision Process for the Sm all 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.
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that al ows a corporation to pass corporate income, losses, deductions, and credits through to its
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 al ows S corporations to avoid double taxation on the corporate income.58 Mutual
lending institutions, which include many thrifts, are owned by their depositors or policyholders.
They have no stockholders. CDFIs are financial entities certified by the 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
noncumulative 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).59
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, typical y 3% for banking institutions with the highest financial ratings
and 4% for others.60
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.61 Treasury officials believed that providing Tier 2 capital would probably result in fewer S
corporation participants. Additional y, because mutual lending 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 wel .62

58 Internal Revenue Service, “S Corporations,” at https://www.irs.gov/businesses/small-businesses-self-employed/s-
corporations.
59 12 C.F.R. §325.2: “T ier 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 T ier 1 capital would have been reduced if the appropriate accounting entries
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 am ount of the total adjusted carrying
value of nonfinancial equity investments that is subject to a deduction from T ier 1 capital as set forth in section II.B.(6)
of appendix A to this part.”
60 For further information and analysis of federal banking regulations, see CRS Report R44918, Who Regulates Whom?
An Overview of the U.S. Financial Regulatory Fram ework, by Marc Labonte.
61 U.S. Department of the T reasury, Office of the Inspector General. Small Business Lending Fund: Investment
Decision Process for the Sm all Business Lending Fund , May 13, 2011, p. 7, at http://www.treasury.gov/about/
organizational-struct ure/ig/Documents/SBLF%20Report%20(OIG-SBLF-11-001).pdf.
62 U.S. Department of the T reasury, Office of the Inspector General. Small Business Lending Fund: Investment
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Treasury completed its regulations for C corporation banks first. For C corporations, SBLF funds
are treated as Tier I capital and Treasury purchases senior perpetual noncumulative preferred
stock (or an equivalent). The stock pays 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
nonredeemable, noncumulative preferred stock. In contrast, S corporations and mutual lending
institutions receive unsecured subordinated debentures from the Treasury, which are considered
Tier 2 capital for regulatory capital requirements.63
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 bil ion in
SBLF funding.64
Treasury approved more than $4 bil ion in SBLF financing to 332 lending institutions ($3.9
bil ion to 281 community banks and $104 mil ion to 51 CDFIs).65 SBLF recipients have offices
located in 47 states and the District of Columbia. The average financing was $12.1 mil ion,
ranging from $42,000 to $141 mil ion.66
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 nearly $2.7 bil ion in SBLF financing (66.8% of the total).67
Small Business Lending Progress Reports
Treasury is required to publish monthly reports describing al transactions made under the SBLF
program during the reporting period. It is also required to publish a semiannual report (each
March and September) providing al projected costs and liabilities, operating expenses, and
transactions made by the SBLF, including a list of al participating institutions and the amounts
each institution has received under the program. Treasury must also publish a quarterly report
describing how participating institutions have used the funds they have received.68
SBLF participants must submit an initial supplemental report to Treasury no later than five
business days before closing. The report provides information from the institution’s FDIC cal
reports or, for holding companies, from their subsidiaries’ FDIC cal reports, that Treasury uses to

Decision Process for the Sm all Business Lending Fund , p. 7.
63 12 C.F.R. Appendix A to Part 3 - Risk-Based Capital Guidelines: “T he following elements comprise a national
bank’s T ier 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 T he amount of the allowance for loan and lease
losses that may be included in capital is based on a percentage of risk -weighted assets.”
64 U.S. Department of the T reasury, “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/DocumentsSBLFT ransactions/SBLF%204106(2)%20Cost%20Report.pdf.
65 U.S. Department of the T reasury, “SBLF Investments as of September 27, 2011,” at http://www.treasury.gov/
resource-center/sb-programs/DocumentsSBLFT ransactions/SBLF_Bi-
Weekly_T ransactions_Report_THRU_09272011.pdf .
66 U.S. Department of the T reasury, “SBLF Investments as of September 27,” 2011.
67 U.S. Department of the T reasury, “SBLF Investments as of September 27,” 2011.
68 P.L. 111-240, the Small Business Jobs Act of 2010, §4106. Reports.
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establish an initial baseline for measuring the SBLF participants’ progress in making loans to
smal businesses.69
The initial baseline is the average amount of qualified smal business lending that was
outstanding for the four full quarters ending on June 30, 2010.70 It is derived by first adding the
outstanding amount of lending reported for al 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 mil ion), loans to large businesses
(defined as businesses with annual revenues greater than $50 mil ion), 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.71
Each SBLF participant’s smal business lending baseline is also adjusted to take into account any
gains in qualified smal business lending during the four baseline quarters resulting from mergers,
acquisitions, and loan purchases. This adjustment is designed to ensure that dividend rate
reductions provided to any SBLF participant correspond to additional lending to smal businesses
and not to the acquisition of existing loans.72 In addition, the cumulative baseline for al SBLF
participants wil decrease over time as SBLF participants repay their SBLF loans and exit the
program. For example, the initial smal business lending baseline for the 332 SBLF participants
as of March 31, 2011, was $35.52 bil ion ($34.75 bil ion for 281 banks and $770.48 mil ion for
51 CDFIs).73 The smal business lending baseline for the nine institutions that continued to
participate in the SBLF as of December 31, 2019, was $443.8 mil ion ($405.7 mil ion for six
banks and $38.1 mil ion for three CDFIs).74
Table 3 provides the number and type of SBLF participating institutions, the smal business
lending baseline, the amount of smal business lending by participants, the change in smal
business lending by participants, and the change in smal business lending by both current and
former participants from 2011 to 2019. The number of SBLF participating institutions is declining
as institutions repay their loans and exit the program. As Treasury anticipated, this decline
accelerated following the first quarter of 2016 because the dividend rates for C corporation banks
and savings associations and for S corporation banks and mutual lending institutions were
increased at that time (to 9% and 13.8%, respectively).75

69 U.S. Department of the T reasury, “SBLF: Getting Started Guide,” June 27, 2011, p. 13, at http://www.treasury.gov/
resource-center/sb-programs/Documents/SBLF%20Getting%20Started%20Guide.pdf.
70 U.S. Department of the T reasury, “SBLF: Getting Started Guide,” p. 13.
71 U.S. Department of the T reasury, “SBLF: Getting Started Guide,” p. 15.
72 U.S. Department of the T reasury, “SBLF Quarterly 4106(3) Report – 4Q 2011,” at http://www.treasury.gov/resource-
center/sb-programs/DocumentsSBLFT ransactions/Use%20of%20Funds%204016(3)%20Report%20-%2001-09-12.pdf.
73 U.S. Department of the T reasury, “SBLF Use of Funds Report: T hird Quarter 2011 (excel file),” October 26, 2011, at
http://www.treasury.gov/resource-center/sb-programs/Pages/sblf_transactions.aspx.
74 U.S. Department of the T reasury, “Report on SBLF Participants’ Small Business Lending Growth,” April 15, 2020,
at https://www.treasury.gov/resource-center/sb-programs/DocumentsSBLFT ransactions/
LGR%20April%202020%20Final%2004 -01-2020%20Clean%20V1.pdf.
75 U.S. Department of the T reasury, “Small Business Lending Fund, Lending Growth Report,” April 8, 2016, p. 1, at
https://www.treasury.gov/resource-center/sb-programs/DocumentsSBLFT ransactions/
LGR%20April%202016%20FINAL%204 -1-2016.pdf.
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Table 3. SBLF Participants: Baseline, Lending, and Change in Lending, 2011-2019
(bil ions of dol ars)
Change in
Lending Baseline
Lending
Change in
Lending (current
(current
(current
Lending (current
& former
Date
Banks
CDFIs
#
participants)
participants)
participants)
participants)
Dec. 31, 2019
6
3
9
$0.443
$0.717
$0.274
$19.100
Sept. 30, 2019
6
3
9
$0.443
$0.771
$0.268
$19.100
June 30, 2019
7
34
41
$1.413
$2.446
$1.033
$19.000
March 31, 2019
7
40
47
$1.479
$2.751
$1.272
$19.100
Dec. 31, 2018
7
43
50
$1.523
$2.870
$1.347
$19.100
Sept. 30, 2018
7
43
50
$1.523
$2.871
$1.348
$19.100
June 30, 2018
8
46
54
$1.597
$2.901
$1.304
$19.000
March 31, 2018
10
46
56
$2.075
$4.281
$2.206
$19.100
Dec. 31, 2017
10
46
56
$2.075
$4.168
$2.093
$18.900
Sept. 30, 2017
10
46
56
$2.074
$4.082
$2.007
$18.907
June 30, 2017
13
46
59
$2.655
$4.922
$2.267
$18.697
March 31, 2017
15
46
61
$2.746
$5.157
$2.411
$18.761
Dec. 31, 2016
20
46
66
$3.497
$6.726
$3.229
$18.809
Sept. 30, 2016
23
46
69
$3.683
$7.024
$3.341
$18.711
June 30, 2016
31
46
77
$4.806
$8.561
$3.755
$18.735
March 31, 2016
39
46
85
$5.109
$9.454
$4.344
$18.464
Dec. 31, 2015
115
47
162
$15.824
$24.614
$8.790
$18.410
Sept. 30, 2015
183
47
230
$28.378
$41.815
$13.437
$17.967
June 30, 2015
212
47
259
$31.843
$47.063
$15.220
$17.660
March 31, 2015
219
48
267
$31.292
$46.686
$15.394
$16.364
Dec. 31, 2014
226
48
274
$31.494
$46.613
$15.119
$15.819
Sept. 30, 2014
232
48
280
$31.571
$45.844
$14.273
$14.713
June 30, 2014
241
49
290
$32.975
$46.505
$13.530
$13.790
March 31, 2014
245
50
295
$33.148
$45.541
$12.393
$12.623
Dec. 31, 2013
248
50
298
$32.985
$45.491
$12.506
$12.356
Sept. 30, 2013
257
50
307
$35.056
$46.213
$11.157
$11.387
June 30, 2013
265
50
315
$36.544
$46.937
$10.393
$10.396
March 31, 2013
267
50
317
$36.320
$45.310
$8.990
$8.992
Dec. 31, 2012
270
50
320
$36.886
$45.811
$8.925
$8.934
Sept. 30, 2012
275
51
326
$36.544
$43.982
$7.438
$7.443
June 30, 2012
277
51
328
$35.990
$42.665
$6.675
$6.675
March 31, 2012
281
51
332
$36.124
$41.322
$5.198
$5.198
Dec. 31, 2011
281
51
332
$35.975
$40.794
$4.819
$4.819
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Change in
Lending Baseline
Lending
Change in
Lending (current
(current
(current
Lending (current
& former
Date
Banks
CDFIs
#
participants)
participants)
participants)
participants)
Sept. 30, 2011
281
51
332
$35.878
$39.412
$3.534
$3.534
June 30, 2011
281
51
332
$35.597
$38.430
$2.833
$2.833
March 31, 2011
281
51
332
$35.521
$37.134
$1.613
$1.613
Source: U.S. Department of the Treasury, “Report on SBLF Participants’ Smal Business Lending Growth,” April
15, 2020 (both .pdf and excel files), at https://www.treasury.gov/resource-center/sb-programs/Pages/
sblf_transactions.aspx.
Notes: In the fourth quarter of 2013 redemptions by SBLF participants with negative lending balances outpaced
that of institutions with positive lending balances. As a result of these redemptions, cumulative lending growth
reported for the period decreased by $150 mil ion when former participants are included.
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.76
Using information contained in the quarterly supplemental reports, Treasury announced in its
April 2020 quarterly report on SBLF Participants’ Small Business Lending Growth that, as of
December 31, 2019
 The nine current SBLF participants (six banks and three CDFIs) increased their
smal business lending by $273.7 mil ion over a $443.8 mil ion baseline.77
 Since inception, the total increase in smal business lending reported by both
current and former SBLF participants is more than $19.1 bil ion over the
baseline.
 Five of the six currently participating community banks and al three of the
currently participating CDFIs increased their smal business lending over
baseline levels.
 Seven of the nine current SBLF participants increased their smal business
lending by 30% or more.78
Treasury officials have praised the SBLF’s performance. For example, on October 9, 2012, then-
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 Smal Business Lending
Fund is continuing to help create an environment in which entrepreneurial smal businesses can
succeed and excel.”79 He added that “banks in the SBLF program continue to show large

76 U.S. Department of the T reasury, “SBLF: Getting Started Guide,” June 27, 2011, p. 13, at http://www.treasury.gov/
resource-center/sb-programs/Documents/SBLF%20Getting%20Started%20Guide.pdf.
77 U.S. Department of the T reasury, “Report on SBLF Participants’ Small Business Lending Growth,” April 15, 2020
(both .pdf and excel files), at https://www.treasury.gov/resource-center/sb-programs/Pages/sblf_transactions.aspx.
As of March 1, 2020, 321 institutions with aggregate investments of $3.93 billion have fully redeemed their SBLF
funding and exited the program, and 4 institutions have partially redeemed $13.5 million (or 62% of their SBLF
securities) while continuing to participate in the program.
78 U.S. Department of the T reasury, “Report on SBLF Participants’ Small Business Lending Growth,” April 15, 2020.
79 U.S. Department of the T reasury, “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.
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increases in the lending available for smal businesses to grow, create jobs, and support families
in communities across the country.”80
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 although the report of increased smal 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.81 Another commentator noted that the data may have been
skewed by SBLF participants who were entering the smal business lending market for the first
time, making the increases appear larger and more significant than they actual y are; yet another
noted that the reported growth in smal business lending occurred over six quarters (since June
30, 2010) and that the results, although positive, are “not as impressive as it may seem.”82 A
commentator argued in September 2012 that “if the SBLF ends up being a success story, it wil
have been on a far smal er 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 fal en off, as smal businesses themselves are reluctant to expand in
a stagnant economy.”83
In addition, on August 29, 2013, Treasury’s Office of Inspector General (OIG) released an audit
of Treasury’s reporting of smal business lending gains relative to smal business lending levels
prior to the lenders’ participation in the program. The OIG found that “smal business lending
gains reported by Treasury are significantly overstated and cannot be linked directly to SBLF
funding.”84 Specifical y, the OIG noted that “substantial amounts [$3.4 bil ion of the then
reported $8.9 bil ion] 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.85
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
al smal business lending gains that institutions participating in the SBLF achieved, regardless of

80 U.S. Department of the T reasury, “Treasury Announces $6.7 Billion Increase in Small Business Lending at Banks
Receiving Capital through the Small Business Lending Fund (SBLF) .”
81 Harry T erris, “Former T ARP Banks Lag Peers in SBLF Lending,” American Banker, vol. 177, no. 16, January 25,
2012.
82 Kate Davidson, “Was the SBLF Program a Success?” American Banker, vol. 177, no. 8, January 12, 2012.
83 Suzy Khimm, “Has Obama Really Helped Small Business?” The Washington Post, September 11, 2012, at
https://www.washingtonpost.com/news/wonk/wp/2012/09/11/has-obama-really-helped-small-businesses/?utm_term=
.1a2e6d903dc6.
84 U.S. Department of the T reasury, Office of the Inspector General, Small Business Lending Fund: Reported SBLF
Program Accom plishm ents 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-
012%20fix%209%2010%2013.pdf.
85 U.S. Department of the T reasury, Office of the Inspector General, Small Business Lending Fund: Reported SBLF
Program Accom plishm ents Are Misleading Without Additional Reporting , pp. 3, 9-11.
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how the loans were funded.”86 In addition, the OIG noted, among other findings, that “a relatively
smal number (35 or 11%) of SBLF participants accounted for half of smal business lending
increases between the baseline figure and December 31, 2012.”87
Proposed Legislation
During the 112th Congress, several bil s were introduced to change the SBLF. None of the bil s
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.88
The bil would have, among other things,
 required recipients to repay SBLF distributions within 10 years of the receipt of
the investment;89
 terminated the program no later than 15 years after the date of the bil ’s
enactment;90
 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 bil ’s enactment);
 removed provisions al owing 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;91 and

86 U.S. Department of the T reasury, Office of the Inspector General, Small Business Lending Fund: Reported SBLF
Program Accom plishm ents Are Misleading Without Additional Reporting , pp. 3, 11-13.
87 U.S. Department of the T reasury, Office of the Inspector General, Small Business Lending Fund: Reported SBLF
Program Accom plishm ents Are Misleading Without Additional Reporting , p. 11.
88 U.S. Senator Olympia Snowe, “Snowe Calls for Comprehensive Fixes to Small Business Lending Fund,” press
release, March 30, 2011, at https://www.sbc.senate.gov/public/index.cfm/2011/3/snowe-calls-for-comprehensive-fixes-
to-small-business-lending-fund.
89 Current law provides the T reasury 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.
90 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. T ermination and Continuation of Authorities.
91 Current law requires the T reasury 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.
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 revised the benchmark against which changes in the amount of smal business
lending is measured from the four full quarters immediately preceding the date of
enactment to calendar year 2007.92
In addition, H.R. 1387, the Smal Business Lending Fund Accountability Act of 2011, would have
provided the Special Inspector General for TARP responsibility for providing oversight of the
SBLF.
S.Amdt. 279 to S. 493, the Smal Business Innovation Research, Smal Business Technology
Transfer Reauthorization Act of 2011, would have prevented TARP recipients from using funds
received in any form under any other federal assistance program, including the SBLF program.
H.R. 2807, the Smal Business Leg-Up Act of 2011, 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 expired (on September 27, 2011). The bil ’s stated intent was “to increase
the availability of credit for smal businesses.”93
H.R. 3147, the Smal Business Lending Extension Act, would have extended the Department of
the Treasury’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.
During the 113th Congress, H.R. 2474, the Community Lending and Smal Business Jobs Act of
2013, would have, among other provisions, transferred any unobligated and repaid funds from the
SBLF to the Community Development Financial Institutions Fund.94
Concluding Observations
The SBLF was enacted as part of a larger effort to enhance the supply of capital to smal
businesses. Advocates argued that the SBLF would help to address the decline in smal business
lending and create jobs. Opponents were not convinced that it would enhance smal business
lending and worried about the program’s potential cost to the federal treasury and its similarities
to TARP.
Participating institutions are reporting they have increased their smal business lending. However,
as has been discussed, questions have been raised concerning the validity of these reported
amounts. Specifical y, as Treasury’s OIG argued in its August 2013 audit, more than one-third of
the reported lending gains at that time occurred prior to September 30, 2011, the quarter in which
most SBLF participants received their SBLF funds; the reported smal business lending gains

92 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,” Washingto n, DC, March
30, 2011, at https://www.sbc.senate.gov/public/index.cfm/2011/3/snowe-calls-for-comprehensive-fixes-to-small-
business-lending-fund.
93 H.R. 2807, the Small Business Leg-Up Act of 2011.
94 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.
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reflect al of the smal 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 smal business lending activity.”95 In those previous audits, “50% or more of the
institutions reviewed submitted erroneous lending data to Treasury, either overstating or
understating their smal business lending gains.”96
In addition to questions related to the validity of the reported smal business lending gains, any
analysis of the program’s influence on smal business lending is likely to be more suggestive than
definitive because differentiating the SBLF’s effect on smal business lending from other factors,
such as changes in the lender’s local economy, is methodological y chal enging, especial y given
the relatively smal amount of financing involved relative to the national market for smal
business loans. The SBLF’s $4 bil ion in financing represents less than 0.7% of outstanding smal
business loans (as defined by the FDIC).97
In terms of concerns about the program’s potential cost, Treasury initial y estimated in December
2010 that the SBLF could cost taxpayers up to $1.26 bil ion (excluding administrative costs that
were initial y estimated at about $26 mil ion annual y but actual costs were $4.54 mil ion in
FY2014, $9.05 mil ion in FY2015, $5.01 mil ion in FY2016, $3.4 mil ion in FY2017, $7.6
mil ion in FY2018, and $3.4 mil ion in FY2019).98 Treasury based that estimate on an expectation

95 U.S. Department of the T reasury, Office of the Inspector General, Small Business Lending Fund: Reported SBLF
Program Accom plishm ents 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.
96 U.S. Department of the T reasury, Office of the Inspector General, Small Business Lending Fund: Reported SBLF
Program Accom plishm ents Are Misleading Without Additional Reporting , p. 4. Under the Small Business Jobs Act, the
Department of the T reasury’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 T reasury no less than two times a year. T o date, T reasury’s
Inspector General has released 10 SBLF reports (one informal and nine formal). T hese reports examined and made
recommendations for improving T reasury’s early investment decision process for evaluating SBLF applicants (informal
audit, May 13, 2011); T reasury’s SBLF cost and liabilities projections (December 22, 2011); T reasury’s investment
decisions concerning early-entry SBLF participants (February 17, 2012); T reasury’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); the accuracy of first quarter 2013 dividend rate adjustments (September 27, 2013) ; and
use of capital, plans for repaying SBLF funds, and recipient satisfaction with T reasury’s administration of the program
(March 27, 2014). T o 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 (GAO) was required to audit the program annually. P.L. 113-188, the Government Reports
Elimination Act of 2014, repealed this requirement.
97 As of June 30, 2019 (the latest available data), the FDIC reports that small business loans (defined by the FDIC as
commercial and industrial loans of $1 million or less) for nonagricultural purposes was $644.52 billion ($4
billion/$644.52 billion = 0.620%). See Federal Deposit Insurance Corporation, “ Statistics on Depository Institutions:
Standard Industry Reports,” at https://www.fdic.gov/bank/statistical/.
98 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 Ac t of 1990. See OMB
Circular A-11, §185.2. Also, see U.S. Department of the Treasury, “ Cost report,” January 30, 2015, p. 4 at
http://www.treasury.gov/resource-center/sb-programs/DocumentsSBLFT ransactions/
FY2014%20Midyear%20SBLF%20Cost%20Report.pdf ; U.S. Department of the T reasury, “ Cost report,” July 25,
2016, pp. 2-4, at https://www.treasury.gov/resource-center/sb-programs/DocumentsSBLFT ransactions/
FY2015%20SBLF%20Cost%20Report.pdf; U.S. Department of the T reasury, “ Cost report,” June 5, 2017, pp. 2-4, at
https://www.treasury.gov/resource-center/sb-programs/DocumentsSBLFT ransactions/
FY2016%20Year%20End%20Cost%20Report.pdf; U.S. Department of the T reasury, “ Cost report,” May 2, 2018, p. 4,
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that about $17 bil ion 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 w ould
generate a savings of $80 mil ion (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.99 Treasury issues a semiannual report on SBLF costs. In its latest semiannual cost report,
released on July 30, 2019, Treasury estimated that the SBLF wil generate a lifetime “positive
return of $29 mil ion, excluding administrative costs,” for the Treasury General Fund.100
One issue that arose relative to the program’s projected cost is the noncumulative treatment of
dividends. Treasury’s OIG 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
treatment as those purchased from depository institutions, Treasury made t he 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.101
Treasury addressed this issue by placing the following additional requirements and restrictions on
participants who miss dividend payments:

at https://www.treasury.gov/resource-center/sb-programs/DocumentsSBLFT ransactions/
FY2017%20Year%20End%20Cost%20Report_Final.pdf ; U.S. Department of the Treasury, “ Cost report,” August 16,
2018, p. 4, at https://www.treasury.gov/resource-center/sb-programs/DocumentsSBLFT ransactions/FY2018_Mid-
year_SBLFCost_Report.pdf; and U.S. Department of the T reasury, “ Cost report,” July 30, 2019, p. 4, at
https://www.treasury.gov/resource-center/sb-programs/DocumentsSBLFT ransactions/
FY2019_Mid_Year_SBLF_Cost_Report_OMBcleared_FINAL.pdf .
99 U.S. Department of the T reasury, Office of the Inspector General, Small Business Lending Fund: Treasury Should
Consider Concerns Regarding Participants Ma nagem ent and Historical Retained Earnings When Estim ating the Cost
of the SBLF Program , December 22, 2011, pp. 1-3, at https://www.treasury.gov/about/organizational-structure/ig/
Documents/OIG-SBLF-12-001[1].pdf.
100 U.S. Department of the T reasury, “Cost report,” July 30, 2019, p. 2, at https://www.treasury.gov/resource-center/sb-
programs/DocumentsSBLFT ransactions/FY2019_Mid_Year_SBLF_Cost_Report_OMBcleared_FINAL.pdf .
101 U.S. Department of the T reasury, Office of the Inspector General, Small Business Lending Fund: Investment
Decision Process for the Sm all Business Lending Fund , May 13, 2011, p. 19, at https://www.treasury.gov/about/
organizational-structure/ig/Audit%20Reports%20and%20Testimonies/OIG-SBLF-11-001.pdf.
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 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 mil ion or more.102
Treasury’s OIG 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.”103
However, it recommended that “Congress consider whether an amendment to the Smal 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.”104
In conclusion, congressional oversight of the SBLF is currently focused on the program’s
potential long-term costs and effects on smal business lending. Underlying those concerns are
fundamental disagreements regarding the best way to assist smal businesses. Some advocate the
provision of additional federal resources to assist smal 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 smal businesses and create jobs.

102 U.S. Department of the T reasury, Office of the Inspector General, Small Business Lending Fund: Investment
Decision Process for the Sm all Business Lending Fund , pp. 19, 20.
103 U.S. Department of the T reasury, Office of the Inspector General, Small Business Lending Fund: Investment
Decision Process for the Sm all Business Lending Fund , p. 20.
104 U.S. Department of the T reasury, Office of the Inspector General, Small Business Lending Fund: Investment
Decision Process for the Sm all Business Lending Fund , 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 bil ion of SBA-guaranteed loans.105 The purchases were intended to “immediately unfreeze
the secondary market for SBA loans and increase the liquidity of community banks.”106 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. Smal er, community banks objected to the program’s paperwork
requirements, such as the provision of a smal -business lending plan and quarterly reports.107
In his January 2010 State of the Union address, President Obama proposed the creation of a
$30 bil ion SBLF to enhance access to credit for smal 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.108
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 bil ion in TARP spending authority to the SBLF and statutorily establish the
new program as distinct and independent from TARP and its restrictions.109 The Administration’s
legislative proposal was finalized and sent to Congress on May 7, 2010.110 Representative Barney

105 P.L. 110-343, the Emergency Economic Stabilization Act of 2008, was designed to enhance the supply of loans to
businesses of all sizes. T he act authorized the T roubled Asset Relief Program (T ARP) 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. T ARP’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 T ARP funds, including $337 million to purchase SBA 7(a) loan guaranty program securities.
T he authority to make new T ARP commitments expired on October 3, 2010. U.S. Department of the T reasury,
T roubled 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, T roubled Asset Relief Program
(T ARP): Implementation and Status, by Baird Webel.
106 T he White House, “Remarks by the President to Small Business Owners, Community Leaders, and Members of
Congress,” March 16, 2009, at https://www.gpo.gov/fdsys/pkg/PPP-2009-book1/pdf/PPP-2009-book1-doc-pg255.pdf.
107 Emily Flitter, “Fix for SBA Snagged by T arp’s Exec Comp Limits,” American Banker, vol. 174, no. 61 (March 31,
2009), p. 1.
108 T he White House, “Remarks by the President in State of the Union Address,” January 27, 2010, at
https://obamawhitehouse.archives.gov/the-press-office/remarks-president -state-union-address.
109 T he White House, “President Obama Outlines New Small Business Lending Fund,” February 2, 2010, at
https://obamawhitehouse.archives.gov/the-press-office/president -obama-outlines-new-small-business-lending-fund.
110 T he White House, “Remarks by the President on the Monthly Job Numbers,” May 7, 2010, at https://www.c-
span.org/video/?293389-2/presidential-remarks-unemployment -numbers.
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Frank, then-chair of the House Committee on Financial Services, introduced H.R. 5297, the Smal
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 the bil , as amended to include a State Smal Business Credit Initiative, the following day.
The House passed the bil , as amended to include a Smal Business Early-Stage Investment
Program, a Smal Business Borrower Assistance Program, and some smal 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 bil ion SBLF “to address the ongoing effects of the financial crisis on smal
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 bil ion or $10 bil ion
(as of the end of the fourth quarter of calendar year 2009) “in order to increase the availability of
credit for small businesses.”111 The authority to make capital investments in eligible institutions
was limited to one year after enactment. Other provisions of the House-passed bil that eventual y
became law with the enactment of are discussed above in the section “The SBLF.”
Eligible financial institutions having total assets equal to or less than $1 bil ion 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 cal report
immediately preceding the application date. During the fourth quarter of 2009, 7,340 FDIC-
insured lending institutions reported having assets amounting to less than $1 bil ion.112
Eligible financial institutions having total assets equal to or less than $10 bil ion 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 cal report
immediately preceding the application date. During the fourth quarter of 2009, 565 FDIC-insured
lending institutions reported having assets of $1 bil ion to $10 bil ion.113
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; and other types of assets (such as smal business loans) have a higher
risk-weighting.114
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

111 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 https://www.fdic.gov/bank/analytical/quarterly/2011-
vol5-3/fdic-quarterly-vol5no3.pdf.
112 FDIC, “Quarterly Banking Profile: Fourth Quarter 2009,” at https://www.fdic.gov/bank/analytical/quarterly/2010-
vol4-1/fdic-quarterly-vol4no1-full.pdf.
113 FDIC, “Quarterly Banking Profile: Fourth Quarter 2009 . In the fourth quarter of 2009, 107 FDIC-insured lending
institutions had assets greater than $10 billion.
114 For further analysis of risk-weighted assets, see CRS Report R44918, Who Regulates Whom? An Overview of the
U.S. Financial Regulatory Fram ework, by Marc Labonte.
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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 no more than 5% per annum initial y,
with reduced rates available if the bank increased its smal 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 smal business lending compared to the
average smal business lending it made in the four previous quarters immediately preceding the
enactment of the bil , minus some al owable adjustments. A 2.5% to less than 5% increase in
smal business lending would have lowered the rate to 4%, a 5% to less than 7.5% increase would
have lowered the rate to 3%, a 7.5% to less than 10% increase would have lowered the rate to 2%,
and an increase of 10% or greater would have lowered the rate to 1%.
Table A-1 shows the dividend rates associated with smal business lending increases for C
corporation banks and savings institutions under H.R. 5297. These rates were subsequently
included in the final law.
Table A-1. SBLF Lending Increases and Dividend Rates for C Corporation Banks and
Savings Associations Under the House-Passed Version of H.R. 5297
Small Business Lending
Increase
Dividend Rate Following Investment Date
Quarter 10

1st 9 Quarters
to Year 4.5
After Year 4.5
10% or greater
1%
1%
9%
At least 7.5% but less than 10%
2%
2%
9%
At least 5% but less than 7.5%
3%
3%
9%
At least 2.5% but less than 5%
4%
4%
9%
Less than 2.5%
5%
5%
9%
No increase
5%
7%
9%
Source: H.R. 5297, the Smal Business Jobs and Credit Act of 2010, Section 103. Smal Business Lending Fund.
Notes: The Senate-passed version of H.R. 5297, which became the Smal Business Jobs Act of 2010, authorizes
the same dividend rates.
The bil also authorized the Secretary of the Treasury to adjust these dividend rates for S
corporations “to take into account any differential tax treatment of securities issued by such
eligible institution.”115 Also, Community Development Financial Institutions were to be charged
a dividend rate of 2% per annum for eight years, and 9% thereafter.
SBLF applicants were also required to submit a smal 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 wil al ow it to address the needs of smal businesses in the areas it serves, as wel as a plan
to provide linguistical y and cultural y 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

115 H.R. 5297, the Small Business Jobs and Credit Act of 2010, Section 103. Small Business Lending Fund.
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a nondepository community development financial institution, the Community Development
Financial Institution Fund, before determining if the eligible institution was to participate in the
program.116
The bil 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 shal not, by virtue of a capital investment under the Smal Business Lending Fund
Program, be considered a recipient of the Troubled Asset Relief Program.”117
The bil also directed that al 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, shal 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 bil ion SBLF to make capital investments in eligible
community banks with total assets equal to or less than $1 bil ion or $10 bil ion. 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. Specifical y, 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 bil ion, bank holding companies, savings
and loan holding companies, community development financial institution loan
funds, and smal business lending companies, al with total assets of $10 bil ion
or less (as of the end of 2009).119 The Senate-passed version of H.R. 5297 did not
provide eligibility to smal business lending companies.120
 House-passed version of H.R. 5297 defined smal business lending “as smal
business lending as defined by and reported in an eligible institution’s quarterly
cal report, where each loan comprising such lending is made to a smal 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;

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
consider allowing the eligible institution to participate in the program if the eligible institution provided mat ching
capital from private, nongovernmental 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, CBO 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, CBO estimated that the
SBLF would result in net outlays of $6.2 billion over the 2010-2020 period. See CBO, “ Cost Estimate: H.R. 5297,
Small Business Lending Fund Act of 2010,” June 28, 2010, pp. 3, 4, at https://www.cbo.gov/sites/default/files/111th-
congress-2009-2010/costestimate/hr5297housepassed0.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.
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(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
definition of smal 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 mil ion or that would be made to a business
with more than $50 mil ion 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 smal 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 (i ) 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 al owed eligible institutions to compute their smal
business lending amounts for incentive purposes as if the definition of their smal
business lending amounts did not require that the loans comprising such lending
be made to smal business.125 This alternative computation would have been
al owed if the eligible institution certified that al lending included by the
institution for purposes of computing the increase in lending was made to smal
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

121 H.R. 5297, the Small Business Lending Fund Act of 2010, §102. Definitions.
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 H.R. 5297, §103. Small Business Lending Fund.
125 H.R. 5297, §103. Small Business Lending Fund.
126 H.R. 5297, §103. Small Business Lending Fund.
127 P.L. 111-240, the Small Business Jobs Act of 2010, §4103. Small Business Lending Fund.
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 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
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 al owed 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 smal 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 Smal Business Early-Stage Investment
Program and Smal Business Borrower Assistance Program, revise the SBLF, and add numerous
other provisions to assist smal businesses, including additional smal business tax reduction
provisions.131 The House agreed to the Senate amendments on September 23, 2010, and President
Obama signed the bil , retitled the Smal Business Jobs Act of 2010 (P.L. 111-240), into law on
September 27, 2010.

Author Information

Robert Jay Dilger

Senior Specialist in American National Government

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
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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. T emporary Amortization Authority.
131 For additional information and analysis concerning P.L. 111-240, the Small Business Jobs Act of 2010, see CRS
Report R40985, Sm all Business: Access to Capital and Job Creation , by Robert Jay Dilger, Small Business: Access to
Capital and Job Creation, by Robert Jay Dilger.
Congressional Research Service
R42045 · VERSION 87 · UPDATED
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