Republican Small Business Committee
Dow Jones: US Small Business Lending Program Disburses $4B
Washington, Sep 28 -
US Small Business Lending Program Disburses $4B
By Jeffrey Sparshott and Jeff Bater, Dow Jones
The Obama administration on Wednesday announced a final round of funding under a program to spur loans to small businesses, though total disbursements have left billions of dollars untapped, and many banks have been left wondering why they didn't qualify.
President Barack Obama signed the Small Business Jobs Act in September 2010. The law's centerpiece was a $30 billion fund targeted at community banks in an effort to increase their lending to smaller companies.
The Treasury Department on Wednesday announced 141 community banks received more than $1.6 billion in the final wave of funding, pushing the total disbursed to more than $4 billion for 332 financial institutions.
"Billions of dollars in SBLF funds are now being put to use in communities all across the nation, spurring small business growth and job creation," Deputy Treasury Secretary Neal Wolin said in a statement.
Still, many more banks applied, only to be confused and ultimately rejected by the process.
"The program is a mixed bag," said Paul Merski, chief economist at the Independent Community Bankers of America, a trade group for almost 5,000 financial institutions.
The banks that received funds will be able to lend more at reasonable terms, probably creating jobs, Merski said.
But Treasury did a poor job explaining why many banks were rejected. "So there's also been quite a bit of frustration with the execution and implementation of the program," Merski said.
Treasury said it received 933 applications requesting $11.8 billion in funding, though more than 40% failed to meet minimum requirements to participate.
Some Republicans are more critical.
"It has been disappointing to follow the poor performance of Treasury's Small Business Lending Fund," said Rep. Sam Graves (R., Mo.), chairman of the House Small Business committee.
Graves said the Obama administration's efforts to help small business have been off target--rather than stimulus, companies need fewer regulations, a reformed tax code and measures to help consumer confidence.
The Treasury Department defended the program, saying it developed a thorough review process that safeguards taxpayer dollars. "Treasury has approved all institutions qualified for taxpayer investment and well-positioned to extend credit to businesses in their communities," Treasury said in a report on the lending fund.
And banks that received funds say they will be able to boost lending.
"We will use this new capital to lend to qualified small businesses who intend to create new jobs," said Richard Sanborn, president and chief executive of Seacoast Commerce Bank (SCCB). The Chula Vista, Calif., bank received $4 million in SBLF funds.
Small banks that draw from the fund will make repayments at different interest rates, ranging from 1% to 5%. Banks that increase their small-business lending by at least 10% would pay the lowest rate.
The Small Business Jobs Act stipulates that lenders must have less than $10 billion in assets to participate in the fund; there are about 7,400 in the country.
Lending from such institutions has tumbled since the financial crisis. Outstanding loan balances at banks with $10 billion or less in assets was $1.799 trillion at the end of the second quarter this year, the lowest figure since the end of 2004, according to Federal Deposit Insurance Corp. figures.
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