WASHINGTON — The Small Business Lending Fund is projected to generate an $80 million profit, rather than the $1.3 billion cost initially estimated, according to a Treasury Department report.

The savings are the result of Treasury making fewer actual investments than expected, coupled with lower projected default rates among the program's 332 participants as their financial condition has improved, the agency said in a report sent to Congress Thursday.

A decrease in the projected cost of raising funds — lower interest rates at the time of the investments and lower projected market rates over the life of the program — also contributed to the savings, the report said.

"Any realized savings go right back into the general fund — a profit for all of us," Don Graves, Treasury's deputy assistant secretary for small business, community development and housing policy, said in a blog post on the Treasury website Thursday.

Treasury incurred $33 million in operating expenses for the program in fiscal year 2011, compared to an operating budget of $55 million.

Critics have complained the agency took too long to get the program off the ground, and didn't do enough to distribute the capital, allocated for community banks and credit unions with less than $10 billion in assets. It awarded approximately $4 billion of the $30 billion authorized by Congress under the Small Business Jobs Act.

The report emphasized Treasury's efforts to reach out to potential applicants, including participating in more than 50 industry events, hosting teleconferences and webinars, and making more than 4,600 calls to individual institutions. But the agency had spent just $29,110 on travel for outreach activities as of Sept. 30, compared to the $187,000 budgeted for fiscal year 2011.

Yet the program appears to be meeting its goals: participating institutions have increased lending to small businesses by $3.5 billion, or 10%, over baseline levels.

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