CAP provides businesses with access to capital by encouraging lenders who participate in the program to make loans they may not otherwise make. The CAP-SSBCI allows lenders to consider making slightly riskier loans that might not meet conventional small business lending requirements. Under CAP, the borrower, the lender and the IEDC each contribute a percentage of the loan into the lender’s dedicated reserve fund, which pools contributions (premiums) from all CAP-SSBCI loans enrolled by the particular lender. The lender determines whether a loan is made, the interest rate, the terms and conditions and the percentage contributed to the reserve fund (borrower and lender each contribute between 1.0 to 3.5 percent of the loan amount enrolled). The borrower pays its designated percentage and the lender matches this amount (which the lender passes on to the borrower). The IEDC contributes a combined match of both the lender and borrower for a 1:1 premium match. CAP was established under I.C. 5-28-30-4.
The Small Business Jobs Act of 2010 (the “Act”) was signed into law on September 27, 2010. The Act created the State Small Business Credit Initiative (SSBCI) to provide direct support to states for use in programs designed to increase access to credit for small businesses. Pursuant to the Act, the U.S. Treasury has allocated funds to the State of Indiana to provide funding for the Indiana Capital Access Program – State Small Business Credit Initiative (the “Program” or CAP-SSBCI). CAP-SSBCI is a small business credit enhancement program that creates a specific cash reserve fund for a lender to use as additional collateral for loans enrolled in the program by the particular lender.