Community banks lining up for small-business loan funds
Premium content from Business Courier - by Kent Hoover, Washington Bureau Chief
Date: Friday, May 20, 2011, 6:00am EDT
About 650 community banks applied for $9.3 billion in capital from the Treasury Department's Small Business Lending Fund by May 16, the deadline for C corporations and savings institutions.
Another 100 to 200 community banks that are S corporations or mutual institutions are expected to apply for the capital by June 6, the deadline for these types of institutions.
The Small Business Lending Fund was created to provide cheap capital to community banks for the purpose of making small business loans. The more loans a bank makes to small businesses, the lower the dividend rate it will pay the government for this capital. The Small Business Jobs Act, which was enacted last September, authorized the Treasury Department to provide community banks with up to $30 billion of this capital.
The program will fall short of that maximum, but Gene Sperling, who chairs the National Economic Council, is happy with the number.
"That is a pretty solid response," he said.
The legislation authorized more capital than was likely to be tapped to give banks confidence that the fund would not run of money, said Sperling, who helped create the program.
Paul Merski, chief economist for the Independent Community Bankers of America, also said the response was strong.
"That's a very good number, given that we're not in the heat of the financial meltdown," Merski said.