The U.S. Treasury Department recently reported figures that show the Small Business Lending Fund (SBLF) – a program comprised of 332 community banks and community development loan funds (CDLF) with less than $10 billion in assets – has increased the number small business loan approvals this year. This is the seventh quarter in a row the SBLF program has spearheaded growth in small business lending.
The SBLF boosted small business loan financing by about $8.9 billion since the recession. The increased lending represents an estimated addition of 38,000 small business loans over baseline levels. The program encourages small business financing by providing capital to community banks and CDLFs.
Banks less likely to lend to small business owners
The Treasury Department invested over $4 billion into the 332 institutions through the SBLF to encourage small business lending after the Great Recession. Since banks are less likely to approve funding for businesses that are just starting out, the Treasury Department decided to use incentives to persuade community banks and CDLFs to lend to small businesses and propel economic growth.
The SBLF provides the financial institutions with capital. Since 2010, over 80 percent of SBLF participants have increased their small business loans by at least 10 percent, The Business Journal reports.
“In every region of the country, the… [SBLF] is supporting small and family-owned businesses with the funds they need to create jobs and grow,” Deputy Secretary of the Treasury Neal Wolin said. “This quarter’s report shows that SBLF participants are continuing to help thousands of small businesses invest, hire, and expand in their local communities.”
Small business success essential to healthy economy
The dividend or interest rate a community bank pays on SBLF funding is reduced as the bank increases its lending to small businesses – providing a strong incentive for new lending to small businesses so that these firms can expand and create jobs.
Small businesses are a crucial component to a healthy economic state, yet they are often hit the hardest by the tough economic climate because big banks are less likely to lend to them. When small businesses have a difficult time securing capital, owners often turn to credit card spending or are forced to reduce essential expenditures, damaging their bottom line. Small businesses that are denied funding are usually unable to hire employees, which further prolongs recession conditions.
Businesses owners ready to obtain new financing can always contact National Funding, a leader in the industry, to take out a small business loan or merchant cash advance.