Multi Billion Dollar Small Business Lending Fund Sees Few Bank Participants
Written by Jenna Weiner
The Jobs Act's $30 billion lending fund has only seen a participation rate of 7 percent since being approved last fall.
As part of last fall's Small Business Jobs Act, the Obama administration established a $30 billion lending fund for small businesses. While it was praised highly at the time, since then it has seen little activity, according to small business finance news.
A recent article from the Wall Street Journal reveals that only 7 percent of banks have participated in the program, with 526 community banks requesting $7.6 billion in funds. While this has certainly been a boon to small businesses seeking funds, nearly 7,700 lenders are eligible for the program.
However, banks have been wary of joining up for a number of reasons, including increased government scrutiny and continued risk, while other experts oppose the program's incentive of reducing interest rates for the more loans a financial institution approves.
"I continue to oppose this fund, which had not been fully vetted before it was signed into law, risks taxpayer funds and provides a perverse incentive for banks to make poor lending decisions in order to reduce the interest rate on the money they receive," Republican Senator Olympia Snowe said in a statement, the source reports.
Originally, community banks had until March 31 to apply for the program. However, due to low turnout, the Treasury Department has extended the deadline to May 16.
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