Small Biz “Lending and Jobs” Bill – Part One

As you may have heard by now, the Small Business Jobs and Lending Bill – HR 5297 – received enough votes in the Senate to move forward for a final vote expected later this week.  From there it is expected to be quickly approved by the House and sent to the President for signature.

The bill is fairly comprehensive and includes numerous provisions to help small businesses including the most talked about and debated part of the bill – The Small Business Lending Fund.

The Small Business Lending Fund is a $30 billion lending fund facilitated by the US Treasury and it should provide banks enough incentive to make the good loans they haven’t been making due to lack of capital.

This fund is targeted at community banks and banks under $10 Billion in assets.

Here is the really short/overly simplified way the money would get to the banks:

The Treasury purchases preferred stock in a small bank and the bank pays a dividend to the Treasury of 5%.  The more (small business) lending the bank does the lower the dividend paid to the Treasury.

Only time will tell how much lending will actually occur and there has been a lot written about how $30 billion could translate into $300 billion in lending to small businesses and if there is really that much pent up demand.

We’ll have to wait and see, but I can tell you from speaking with bankers and others in the SBA lending industry that they can’t wait for this bill to be finalized and one only needs to see how badly the ICBA – Independent Community Bankers of America – wanted this to see how they feel about lending demand.

Certainly this fund will be responsible for more lending to small businesses.

Next post…why the bill will initially create more “Job Retention” than “Job Creation”