Just over nine months since passage, the U.S. Treasury Department announced on July 7, that it has released the first wave of funds under this legislation totaling $123 million. The banks receiving the initial distributions include:
- Community Trust Financial Corporation (Ruston, Louisiana) – $48.3 million,
- Level One Bancorp, Inc. (Farmington Hills, Michigan) – $11.3 million,
- Pioneer Bank, SSB (Drippings Springs, Texas) – $3.0 million,
- ServisFirst Bancshares Inc. (Birmingham, Alabama) – $40.0 million,
- U&I Financial Corp (Lynnwood, Washington) – $5.5 million and
- Virginia Heritage Bank (Fairfax, Virginia) – $15.3 million.
Although this first distribution is small in comparison to the $30 billion authorized, Secretary Geithner has stated that Treasury does have applications from banks for $11.6 billion and that additional funding will be made on a rolling basis in the following weeks.
For small businesses seeking needed loans, the above listing of community banks would be a good place to start, because these banks now have an incentive (but not a mandate) to increase small business lending. Under the law, these banks must pay interest on these distributions at 5 percent, but this rate would be reduced to as low as 1 percent for those that increase small business lending by 10 percent or more. On the other hand, the interest rate will increase to 7 percent for those banks that do not increase their small business lending within two years following the loan.
Clearly, we welcome any form of relief for the many small businesses seeking capital needed to grow their businesses and provide new jobs, however, this Small Business Lending Fund is a very small advance against a huge national problem. In our discussion of this legislation just after passage last September, we noted that small businesses needed immediate assistance, and that benefits flowing from the lending fund would only come sometime in the future. We also noted that small businesses would have received much more benefit from a program that provided direct lending. We still believe direct lending to small businesses is needed.
Accordingly, we will urge Congress to re-examine the Small Business Lending Fund to explore the re-allocation of available funds for direct loans to small businesses, especially tech firms, which are responsible for hiring 40 percent of all high tech workers. Small tech firms are a vital link in the road to our economic recovery, and we must take steps to increase much-needed access to capital for this vital segment of our economy.
