Capital access programs (CAPs) provide credit enhancement for small-business loans by pooling contributions from (usually) borrowers, lenders, and public entities to create a reserve fund that the lender can claim against to cover loans that default. The program’s structure provides lenders significant flexibility on a loan-by-loan basis, but the per loan credit support is low, and it requires a borrower contribution, making standard Small Business Administration programs more attractive for many banks. But CAPs were attractive to community development financial institutions (CDFIs) that were used to creative credit enhancements and making many small loans for which Small Business Administration programs were not available or were uneconomic. This brief details the structure of and lessons from the largest of the CAPs, the California Capital Access Program (CalCAP).
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