State Small Business Credit Initiative - Frequently Asked Questions (Faqs) - U.s. Department Of The Treasury Page 27

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U.S. Department of the Treasury
State Small Business Credit Initiative
18.
May SSBCI funds support a loan or investment to a religious establishment?
Yes, a religious establishment may receive SSBCI funds provided that the proceeds of the loan or
investment are used only for a “business purpose.” A “business purpose” does not include an explicitly
religious purpose. SSBCI funds may not support a loan or investment used by the religious
establishment for the purposes of directly supporting, assisting, or furthering an explicitly religious
purpose, including, but not limited to, worship, religious instruction, or proselytization .
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19. How should a state trace SSBCI funds that are allocated to a privately managed venture capital
fund (VC fund) into an eligible business?
When a state allocates SSBCI funds to a VC fund, and the VC fund then combines (commingles) the SSBCI
funds with private capital in a single account, it becomes important for the state to be able to trace the
amount of SSBCI funds expended to each small business to confirm that SSBCI program rules and
guidelines regarding private capital are being followed. There are a variety of ways to do this (the below
list is not exhaustive):
•
A VC fund may designate a subset of its overall portfolio as its “SSBCI portfolio.” For example,
the SSBCI portfolio could consist of the investments closed after the state has allocated SSBCI
funds to the VC fund. The SSBCI portfolio investments must comply with all program rules.
•
A VC fund may invest SSBCI funds pro rata in all of its investments, i.e., proportionately with
funds obtained from other limited partners. All investments must comply with all program
rules.
•
A VC fund may allocate a larger portion of SSBCI funds to certain investments. All investments
must comply with all program rules.
In their written records, states should be explicit about the overall allocation method used and should
record the exact amount of SSBCI funds invested in each small business investment at the time the
investment is made. The state should also record the amount of any VC fund management fees charged
to its SSBCI allocation. VC fund management fees charged to SSBCI funds are considered administrative
expenses and are subject to program rules (please refer to FAQ on Program Income and Administrative
Expense).
Additionally, private lenders or investors must bear 20 percent or more of the risk of loss in any
transaction that uses SSBCI funds. If a VC fund is using SSBCI funds as part of staged funding of a single
investment, when SSBCI funds are invested, 20 percent of the capital-at-risk must be from private
sources.
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20. When can private capital be counted towards a state’s private leverage ratio?
State Small Business Credit Initiative Application
Page 27 of 37
FAQs
April 21, 2016

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