10:1 Private Financing Ratio

How Does a Venture Capital Program Help to Achieve a 10:1 Private Financing Ratio?

To be eligible for federal funding, a state should reasonably demonstrate that, when considered with all
other SSBCI programs of the state, such programs together have the ability to generate private lending
of at least 10 times the new federal contribution amount, also known as the private leverage ratio, by
December 31, 2016. Eligible private lending includes all loans or investments from a private source to an
eligible borrower or eligible portfolio company, whether occurring at or subsequent to loan/investment
closing, as well as any new infusions of cash by the owners of the eligible portfolio company. As an
example, if a state-sponsored Venture Capital Program expects to make 20 venture capital investments
to businesses with the aggregate investment profile shown below, the resulting projected “allocation
time period private leverage ratio” would be 10:1. This calculation would be derived as follows:

1. SSBCI Funds used under the Participating State’s Venture Capital Program              $1,000,000
2. Other Private Equity Investment at Closing of SSBCI-Supported Transaction              $3,000,000
3. Other Private Transaction-Level Debt at Closing of SSBCI-Supported Transaction    $3,000,000
4. Subsequent Private Sector Investment resulting from SSBCI Support                           $4,000,000
5. Total Private Financing ( b + c + d)                                                                                          $10,000,000

             Private Leverage Ratio (e to a)                                                                                                 10:1