Only one-third of Small Business Lending Fund has been tapped

5/22/2011

Small business lending is commonly perceived to be a major issue for many small business owners, but judging by the number of banks taking advantage of the Small Business Lending Fund, it seems demand may have been over-stated.

The Phoenix Business Journal reports that only about 650 community banks have applied for $9.3 billion in capital from the fund - that's roughly one-third of the total money offered by President Barack Obama's legislation. In June, the fund will be opened to community banks that operate as S corporations, giving access to more financial institutions.

"The Small Business Lending Fund was created to provide cheap capital to community banks for the purpose of making small business loans. The more loans a bank makes to small businesses, the lower the dividend rate it will pay the government for this capital," notes the source.

While the economy is slowly beginning to rebound, business owners may still be hesitant to take out commercial loans that they may not be able to pay off if the economy were to take a turn for the worse.