§5704 Approving State Capital Access Programs

Summary

States can apply to get federal money added to a reserve fund for a State capital access program if the program meets certain rules. To be approved, a State had to file a notice within 60 days after March 11, 2021 and a complete application within 9 months after March 11, 2021, and the Secretary must find the State meets other listed requirements. The program must give portfolio insurance using a separate loan-loss reserve fund for each financial institution, require both lenders and borrowers to pay insurance premiums into that fund, have the State add at least the same amount as those premiums for any newly enrolled loan, and cover only loans to businesses with 500 or fewer employees and loans of $5,000,000 or less. If approved, the federal contribution equals the total insurance premiums paid by borrowers and lenders for eligible loans, and a State may use that federal money as its required contribution. The Secretary will set minimum rules. The State must confirm each lender has enough experience and capacity, after consulting the proper federal agency. Reserve funds must be kept safe and liquid or held in a deposit account at the lender. Loan terms are set by lender and borrower agreement, but the lender must keep a meaningful amount of its own capital at risk. Total premiums for a loan must be at least 2% and at most 7% of the loan. The State may add more funds. Loans must be used for business purposes, not for prohibited uses, and cannot be made to insiders, their immediate family, or related interests, nor be a refinancing of a loan from the same lender. When applying, the State must also say how it will use federal contributions to help small businesses in low- and moderate-income, minority, and other underserved communities, including women- and minority-owned businesses. Terms like “executive officer,” “director,” “principal shareholder,” “immediate family,” and “related interest” mean the same as in federal banking rules.