---
kind: "section"
citation: "12 U.S.C. § 5703"
title: "12"
title_heading: "Banks and Banking"
number: "5703"
heading: "Approving States for participation"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/12/5703"
units:
  - "Chapter 54 — State Small Business Credit Initiative"
---

# §5703. Approving States for participation

- (a) **Application—** Any [State](/usc/12/5701.md?p=10) may apply to the [Secretary](/usc/12/5701.md?p=14) for approval to be a [participating State](/usc/12/5701.md?p=6) under the [Program](/usc/12/5701.md?p=7) and to be eligible for an allocation of Federal funds under the [Program](/usc/12/5701.md?p=7).
- (b) **General approval criteria—** The [Secretary](/usc/12/5701.md?p=14) shall approve a [State](/usc/12/5701.md?p=10) to be a [participating State](/usc/12/5701.md?p=6), if—
  - (1) a specific department, agency, or political subdivision of the [State](/usc/12/5701.md?p=10) has been designated to implement a [State program](/usc/12/5701.md?p=13) and participate in the [Program](/usc/12/5701.md?p=7);
  - (2) all legal actions necessary to enable such designated department, agency, or political subdivision to implement a [State program](/usc/12/5701.md?p=13) and participate in the [Program](/usc/12/5701.md?p=7) have been accomplished;
  - (3) the [State](/usc/12/5701.md?p=10) has filed an application with the [Secretary](/usc/12/5701.md?p=14) for approval of a [State capital access program](/usc/12/5701.md?p=11) under [section 5704 of this title](/usc/12/5704.md) or approval as a [State other credit support program](/usc/12/5701.md?p=12) under [section 5705 of this title](/usc/12/5705.md), in each case within the time period provided in the respective section; and
  - (4) the [State](/usc/12/5701.md?p=10) and the [Secretary](/usc/12/5701.md?p=14) have executed an allocation agreement that—
    - (A) conforms to the requirements of this chapter;
    - (B) ensures that the [State program](/usc/12/5701.md?p=13) complies with such national standards as are established by the [Secretary](/usc/12/5701.md?p=14) under [section 5708(a)(2) of this title](/usc/12/5708.md?p=a-2);
    - (C) sets forth internal control, compliance, and reporting requirements as established by the [Secretary](/usc/12/5701.md?p=14), and such other terms and conditions necessary to carry out the purposes of this chapter, including an agreement by the [State](/usc/12/5701.md?p=10) to allow the [Secretary](/usc/12/5701.md?p=14) to audit [State programs](/usc/12/5701.md?p=13);
    - (D) requires that the [State program](/usc/12/5701.md?p=13) be fully positioned, within 90 days of the [State](/usc/12/5701.md?p=10)’s execution of the allocation agreement with the [Secretary](/usc/12/5701.md?p=14), to act on providing the kind of [credit](/usc/12/5481.md?p=7) support that the [State program](/usc/12/5701.md?p=13) was established to provide; and
    - (E) includes an agreement by the [State](/usc/12/5701.md?p=10) to deliver to the [Secretary](/usc/12/5701.md?p=14), and update annually, a schedule describing how the [State](/usc/12/5701.md?p=10) intends to apportion among its [State programs](/usc/12/5701.md?p=13) the Federal funds allocated to the [State](/usc/12/5701.md?p=10).
- (c) **Contractual arrangements for implementation of State programs—** A [State](/usc/12/5701.md?p=10) may be approved to be a [participating State](/usc/12/5701.md?p=6), and be eligible for an allocation of Federal funds under the [Program](/usc/12/5701.md?p=7), if the [State](/usc/12/5701.md?p=10) has contractual arrangements for the implementation and administration of its [State program](/usc/12/5701.md?p=13) with—
  - (1) an existing, approved [State program](/usc/12/5701.md?p=13) administered by another [State](/usc/12/5701.md?p=10); or
  - (2) an authorized agent of, or entity supervised by, the [State](/usc/12/5701.md?p=10), including for-profit and not-for-profit entities.
- (d) **Special permission—**
  - (1) **Circumstances when a municipality may apply directly—** If a [State](/usc/12/5701.md?p=10) does not, within 60 days after March 11, 2021, file with the [Secretary](/usc/12/5701.md?p=14) a notice of its intent to apply for approval by the [Secretary](/usc/12/5701.md?p=14) of a [State program](/usc/12/5701.md?p=13) or within 9 months after March 11, 2021, file with the [Secretary](/usc/12/5701.md?p=14) a complete application for approval of a [State program](/usc/12/5701.md?p=13), the [Secretary](/usc/12/5701.md?p=14) may grant to municipalities of that [State](/usc/12/5701.md?p=10) a special permission that will allow them to apply directly to the [Secretary](/usc/12/5701.md?p=14) without the [State](/usc/12/5701.md?p=10) for approval to be participating municipalities.
  - (2) **Timing requirements applicable to municipalities applying directly—** To qualify for the special permission, a municipality of a [State](/usc/12/5701.md?p=10) shall be required, within 12 months after March 11, 2021, to file with the [Secretary](/usc/12/5701.md?p=14) a complete application for approval by the [Secretary](/usc/12/5701.md?p=14) of a [State program](/usc/12/5701.md?p=13).
  - (3) **Notices of intent and applications from more than 1 municipality—** A municipality of a [State](/usc/12/5701.md?p=10) may combine with 1 or more other municipalities of that [State](/usc/12/5701.md?p=10) to file a joint notice of intent to file and a joint application.
  - (4) **Approval criteria—** The general approval criteria in paragraphs [(2)](#d-2) and [(4)](#d-4) shall apply.
  - (5) **Allocation to municipalities—**
    - (A) **If more than 3—** If more than 3 municipalities, or combination of municipalities as provided in [paragraph (3)](#d-3), of a [State](/usc/12/5701.md?p=10) apply for approval by the [Secretary](/usc/12/5701.md?p=14) to be participating municipalities under this subsection, and the applications meet the approval criteria in [paragraph (4)](#d-4), the [Secretary](/usc/12/5701.md?p=14) shall allocate Federal funds to the 3 municipalities with the largest populations.
    - (B) **If 3 or fewer—** If 3 or fewer municipalities, or combination of municipalities as provided in [paragraph (3)](#d-3), of a [State](/usc/12/5701.md?p=10) apply for approval by the [Secretary](/usc/12/5701.md?p=14) to be participating municipalities under this subsection, and the applications meet the approval criteria in [paragraph (4)](#d-4), the [Secretary](/usc/12/5701.md?p=14) shall allocate Federal funds to each applicant municipality or combination of municipalities.
  - (6) **Apportionment of allocated amount among participating municipalities—** If the [Secretary](/usc/12/5701.md?p=14) approves municipalities to be participating municipalities under this subsection, the [Secretary](/usc/12/5701.md?p=14) shall apportion the full amount of the Federal funds that are allocated to that [State](/usc/12/5701.md?p=10) to municipalities that are approved under this subsection in amounts proportionate to the population of those municipalities, based on the most recent available decennial census.
  - (7) **Approving State programs for municipalities—** If the [Secretary](/usc/12/5701.md?p=14) approves municipalities to be participating municipalities under this subsection, the [Secretary](/usc/12/5701.md?p=14) shall take into account the additional considerations in [section 5705(d) of this title](/usc/12/5705.md?p=d) in making the determination under section [5704](/usc/12/5704.md) or [5705](/usc/12/5705.md) of this title that the [State program](/usc/12/5701.md?p=13) or [programs](/usc/12/5701.md?p=7) to be implemented by the participating municipalities, including a [State capital access program](/usc/12/5701.md?p=11), is eligible for [Federal contributions](/usc/12/5701.md?p=4) to, or for the account of, the [State program](/usc/12/5701.md?p=13).

## Source credit

(Pub. L. 111–240, title III, § 3004, Sept. 27, 2010, 124 Stat. 2573; Pub. L. 117–2, title III, § 3301(a)(1)(B), Mar. 11, 2021, 135 Stat. 69.)

## Notes

### Editorial Notes

### Amendments

2021—Subsec. (d)(1), (2). Pub. L. 117–2 substituted “March 11, 2021” for “September 27, 2010” whenever appearing.

### Statutory Notes and Related Subsidiaries

### Effective Date of 2021 Amendment

Amendment by Pub. L. 117–2 applicable with respect to funds appropriated under section 3301 of Pub. L. 117–2 and funds appropriated on and after Mar. 11, 2021, see section 3301(g) of Pub. L. 117–2, set out as a note under section 5701 of this title.