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Cascade: No. 82, Winter/Spring 2013

Small Business Lenders Have Opportunities for Collaboration on U.S. Treasury Initiative*

Small business lenders may make additional small business loans by working with regional organizations and state economic development agencies in Pennsylvania, New Jersey, and Delaware that are receiving funding under the U.S. Treasury’s State Small Business Credit Initiative (SSBCI).

In the three states, the key agencies are the New Jersey Economic Development Authority (EDA), the Pennsylvania Department of Community and Economic Development (DCED), and the Delaware Economic Development Office (DEDO).

The SSBCI was funded with $1.5 billion under the Small Business Jobs Act of 2010 to strengthen state programs that leverage private lending to small businesses and manufacturers that are creditworthy but that are not receiving the loans they need to expand and create jobs, according to the U.S. Treasury.

The U.S. Treasury allocation is $33,760,698 in New Jersey, $29,241,232 in Pennsylvania, and $13,368,350 in Delaware. The allocation, which is derived by a formula based on the number of job losses in the states, is disbursed in three tranches. In January 2013, the three states were using funds in the first tranch, although the EDA and the DEDO had applied for funds in the second tranch.

The EDA, the DCED, and the DEDO are using the U.S. Treasury funds in existing programs. In one case, the DEDO is using some of the U.S. Treasury funds in a newly launched participation loan program that it had previously operated.

Lenders retain full control of their underwriting and credit decision-making, subject to the SSBCI’s requirements for the use of loan proceeds and borrower eligibility as well as each state program’s requirements. Eligible lenders are insured depository institutions and credit unions as well as community development financial institutions.

Financial institution lenders are generally prohibited from refinancing an existing outstanding balance or previously made loan, line of credit, extension of credit, or other debt already on the books of the same financial institution, according to the U.S. Treasury.

The U.S. Treasury funds are transferred to the states and remain there to be reused. However, federal audits are conducted of SSBCI usage in some states, and if the audits find reckless or intentional misuse of funds, the amounts involved might need to be returned.

Interviews with EDA, DCED, and DEDO officials indicated that the agencies did not know how much additional bank lending had resulted from the agencies’ use of the U.S. Treasury funds. The U.S. Treasury generally seeks leverage of 10 to 1 private to public dollars for the use of SSBCI funds. Rachael M. Mears, director of capital resources at the DEDO, said that the agency has a short-term goal of 5 to 1 private-public participation and that it hopes to increase that capitalization ratio in the future.

For a chart of the programs in Pennsylvania, New Jersey, and Delaware that are using SSBCI funds, visit

SSBCI funds are overseen in the three states by: Lori Matheus, managing director, business development, New Jersey Economic Development Authority, 609-858-6655 or E-Mail; Craig Petrasic, assistant director, Center for Private Financing, Pennsylvania Department of Community and Economic Development, 717-783-1109 or E-Mail; and Rachael M. Mears, director of capital resources, Delaware Economic Development Office, 302-672-6838 or E-Mail. For more information, see External Link.

  • * The views expressed here are those of the author and do not necessarily represent the views of the Federal Reserve Bank of Philadelphia or the Federal Reserve System.