posted at Chamber of Commerce.com:
An idea proposed in last year’s State of the Union address, the Small Business Lending Fundproposed by President Obama in early 2010 is finally getting off the ground. The number of loans being given to small businesses has been on the decline since 2008, leaving tens of billions out of reach for businesses around the country. But the Small Business Lend Fund looks to remedy this downshift, with $30 billion being injected into community banks to jumpstart the small business lending scene that’s been in a slump for quite some time.
Response from banks has been strong, which is good news for businesses looking for loans. That said, however, the new fund may not be as effective as Congress initially hoped. Certain Congressional reports implied that banks would lend $10 for every one dollar in received capital, resulting in $300 billion worth of loans. These figures seem rather optimistic and there’s doubt that demand is that high for such loans.
The success of the fund depends heavily on the responsibility of banks, and soon enough we’ll discover whether or not they’ve learned their lessons in regards to distributing poor loans. Banks eligible for the Small Business Lending Fund must have less than $10 billion in assets, and it’s estimated that over 100 banks have already applied. The application deadline for the fund is March 31st, so there’s still time for more banks to get on board.
The banks that manage to bolster their lending under the program could see a drop in interest from the standard 5% to as low as a single percent. Those who do not increase lending, however, will see their interest rates rocket up to 7% in 2.5 years, and possibly 9% if they don’t duck out of the program in 4.5 years. Loans administered under the program include loans up to $10 million to businesses with $50 or less in yearly revenue.
What does all of this mean for your business? It could mean that it’s finally time to get that loan you were denied last year. Be on the look-out for banks looking to lend under this new program. Even if you aren’t looking for a loan, take solace in the fact that in the wake of so much gloom and doom, things may finally be looking up for the American small business.