President Obama had plans for the small business sector right from the beginning of his tenure. Three years ago the President made a plan to re-use the $30 billion repaid by Wall street bailed out banks. The money was to be used to help main street companies by funding community lenders.
So, the ‘Small Business Jobs Act’ came into existence and the ‘Small Business Lending Fund’ got created. At that time Congress breathlessly kept saying that the program would leverage $30 billion in new loans to the US Small Business Sector. But, unfortunately it didn’t work work out as anticipated. Just $4 billion of money could be disbursed out of the $30 billion fund.
Interestingly, what the Treasury Department suggests is banks that received money increased lending by $6.7 billion. But, ironically, it is found that majority of the money went to banks to repay previous bail-outs. It amounted to $2.2 billion out of the $4 billion disbursed. And banks that actually increased main street lending were the ones that did not make use of new money to repay earlier debts.
Critics then started calling the SBLF as “TARP Junior”. The reason is most of the money given out as funds went to patch up balance-sheets of banks. So, the aggregate is, banks that used the fund to repay TARP loans could hike small business loans by just 10 percent. And banks that were not repaying earlier debts, could boost loans by 35 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 firstname.lastname@example.org