What is the Small Business Lending Fund

Small businesses have always been considered the backbone of the nation.  However, many smaller companies run into challenges and often need additional capital to make ends meet and grow their business.  Following the recession in 2008, a study by the US Federal Reserve said that there was a “…drop in small business loans …as evident at community banks.”  To address this issue, the Small Business Lending Fund (SBLF) was created as part of the 2010 Small Business Jobs Act. The Small Business Jobs Act of 2010 is designed to help banks and lending institutions give out more loans to credible small businesses in need of a cash infusion.

According the Treasury Department, SBLF is a “…dedicated fund designed to provide capital to qualified community banks… in order to encourage small business lending.”  The purpose of the SBLF is to encourage Main Street banks and small businesses to work together, help create jobs, and promote economic growth.

The SBLF provides money to local banks with less than $10 billion in holdings and allows those banks to pay a lower dividend on the funds as it lends more to small businesses, an incentive its creators hope will encourage banks to lend to small-scale companies.   Some companies still struggle to obtain necessary financing and look to alternative lending companies, like National Business Helpers, to secure working capital or a business cash advance.

The US Federal Reserve did a study a few years back and laid out some of the details of SBLF:

• “Banks that increased their lending by less than 10 percent paid rates between 2 percent and 4 percent. If a bank’s lending did not increase in the first two years, however, the rate increased to 7 percent.”

The U.S. Treasury has invested over four billion dollars to hundreds of institutions through the SBLF.  The Treasury claims that as of December 31, 2015 that small business lending increased – and as of March 2016 approximately 13 institutions have partially redeemed their aggregate investments.

There have been several success stories in the past few years as a result of the SBLF.  For instance, Wells Fargo donated a large sum to the Women’s Economic Ventures in California.  The Houston Chronicle reported that BOH Holdings, Inc., a bank holding company for the Bank of Houston that offers commercial banking services, has received $23.9 million through the SBLF.  Likewise, the Nashville Post wrote that “…there are a good number of Nashville-area institutions that are proving otherwise — and four of them are doing so with the help of more than $36 million from the U.S. Treasury. “

Other favorable stats from the US Treasury claim that since the program first started, “…the total increase in small business lending reported by current and former SBLF participants is $18.4 billion over baseline.”  Additionally, as of Q4 2015, current SBLF participants have increased their small business lending by $8.8 billion.