Banks sluggish to apply for small business funding

3/31/2011

Small business owners have been eagerly following the Obama administration's new small business policies, which include a program that would provide nearly $30 billion dedicated to small business lending. However, few community banks have applied for that funding, the Wall Street Journal reports.

Only 526 community banks - 7 percent of the 7,700 lenders that could apply for the funding - have done so, and less than $10 billion of the allocated $30 billion has been distributed to financial institutions thus far. The deadline for applying for this funding is May 16, extended from the previous deadline of March 31.

Some banks are concerned that the extra funding would drive more small business loan requests, which many financial institutions just aren't ready to handle in terms of staff. "It doesn't become cost-effective if you have to add more staff [to accommodate requests]," Jonathan Fox, president and chief executive at Fowler State Bank, told the source.

This trend is causing many small business owners to look for funding elsewhere. For example, according to a recent PNC survey, 37 percent plan to raise product prices to maintain profit margins.