The Small Business Lending Fund, a completely new program, is providing added incentive for Connecticut banks and is meant to help community lenders to trade in Troubled Asset Relief Program (TARP) funds for cheaper capital.
This is a major bonus keeping into view the negative stigma and difficulties that has been attached to TARP. The program has been viewed as a bailout for banking industry, especially for megabanks at centre of crisis. The Connecticut financial institution is known to take advantage of the Small Business Lending Fund program.
BNC Financial Group, a parent company is in the process of receiving $11 million from the SBLF. This will help the banking company make repayments of $5 million that it borrowed from TARP and also expand small business lending. Dividend payments that BNC has to make will also get reduced following strict restrictions on executive payments.
The Hartford-based Connecticut Bank and Trust Co. that is holding $5.4 million in TARP funds has also applied for the $10.5 million in SBLF money. Six Connecticut banks are recipients of TARP funds and four out of them are still having the money and it is very likely that all of them have started to consider the SBLF program. SBLF is a $30 billion small business lending program that is aimed to provide capital to community banks having less than $10 billion in assets. It has been introduced as part of Obama Administration’s Small Business Jobs Act of 2010.
The recipients of TARP are required to pay Treasury Department 5 percent dividend and that is going to get augmented to 9 percent within a few years. However, the dividend rate on SBLF funding shall get reduced as participating banks eventually start increasing their lending to SMEs. Initially, lending rate for banks is fixed at 5 percent but as lending to small businesses increases by up-to 10 percent, the rate will get depreciated to 1 percent.
This article was submitted by Raj Tulshan, Director of Business Development of Biz2Credit. Biz2Credit is a small business marketplace that connects entrepreneurs with financing options and advice to grow their business. Send all questions to