IS UNCLE SAM DOING RIGHT BY SMALL BUSINESS?
By Steve Barlotta, CPA
The Small Business Lending Fund was enacted into law as part of the Small Business Jobs Act of 2010. It was intended to be an investment fund that encourages lending to small businesses by providing capital to qualified community banks with assets of less than $10 billion. If you look on the website of the U.S. Department of the Treasury it states that the purpose of this fund is for lenders and small businesses to work together to help create jobs and promote economic growth in local communities across the nation. To date, the Small Business Lending Fund has provided more than $4 billion to 332 community banks and community development loan funds.
At first, glance this looks like a really good idea, right? Maybe our leaders are finally getting it that our economy cannot get up and running again without reinvigorating our small businesses.
In my opinion they were late to the game by over two years. After all, in that time frame Washington spent well over $1 trillion through the Troubled Asset Relief Program (TARP )and President Obama’s economic stimulus package with little thought about Main Street America. But, maybe we were finally on the right track with the Small Business Lending Fund. Maybe the powers that be were making a serious and sincere attempt to stop the bleeding in the small business community.
Well, after reading a Wall Street Journal article last month, my guarded optimism quickly gave way to my usual cynicism. According to the article, more than half of the $4 billion in funds disbursed through the Small Business Lending Fund to community banks were used to repay bailout funds that the banks received under the government’ s TARP program. Of the 332 banks that received cash through the lending fund, 137 of them used a total of $2.2 billion to repay their TARP obligations. Of the total $30 billion available in the fund, only $4 billion in loans to banks were approved. It seems that under the Small Business Lending Fund regulations, banks are not prohibited from using these proceeds to repay their TARP debt!
Yes, you read that correctly. Once again our government creates a program that sounds good on paper, but the desired result gets extemely diluted through mismanagement (see TARP) or, in this case, an intended loophole in the regulations. It was clearly conveyed by the President and others in Washington, that the purpose of the Small Business Lending Fund was to spur small-business lending by community banks in the hopes of jumpstarting growth and employment. But once again the small business community is left to feel our leaders in Washington are disingenious at best in their commitment to assist them. I believe this half-hearted approach is short-sighted. Without the full participation of a re-energized and, yes, re-capitalized small business sector our anemic economy has little hope of moving forward in the future.
Source: Emily Maltby and Angus Loten, “Tale Of Two Programs’, Wall Street Journal, October 6, 2011.
