Clock is ticking on SBLF; more than $28 billion remains

| 9/8/2011

Time is running out on the U.S. Treasury’s Small Business Lending Fund designed to encourage small-business lending.

Of the $30 billion authorized by Congress to flow into the hands of community banks, more than $28 billion hasn’t been deployed yet – and the program is set to expire on Sept. 27. Until July, none of the funds had been allocated to community banks applying for funds through the SBLF program.

Paul Merski, senior vice president and chief economist for the Independent Community Bankers of America organization, told Land Line on Thursday, Sept. 8, that $1.8 billion in lending had been extended to 130 community banks. As of mid-August, more than 900 community banks had applied for funding through the program.

Merski said the Treasury “is expected to approve another 250 banks before the end of the program.”

“The good news is many community banks will be able to expand their small-business lending due to the SBLF capital,” Merski said. “The ICBA did everything in its power to make the SBLF program work for as many eligible community banks as possible, all the while battling the Congress and regulators.” 

In August, the ICBA sent a letter to Federal Reserve Chairman Ben Bernanke, urging him to do everything in his power to “address the concerns of the remaining eligible applicants who have the capacity and expertise to put SBLF funds to work in their communities as intended by Congress.”

It’s the Federal Reserve’s job to make regulatory recommendations to decide whether a bank applying for the funding can pay back dividends to the Treasury.

As of mid-August, only $590 million had been approved for community banks applying for the program.

Merski said the purpose of the SBLF program was to design a program that would encourage small-business lending. Community banks could lower their dividend costs by demonstrating that they were actually “deploying the capital.”

“In the end the SBLF was properly focused on small business lending, but unfortunately, the implementation and execution of the program was an exercise in frustration for far too many,” Merski said.