Finance & Lending

 

04 16 2013

04 16 2013

Some SBLF Money Used for Bank Bailouts, Not Small Business Loans

The U.S. government’s Small Business Lending Fund (SBLF) program is facing federal scrutiny after investigators discovered $2.1 billion of the SBLF program’s $4 billion fund went to bailing out banks rather than to financing small business loans, which was what the money was intended for.

Small Business Lending Fund under fire

Congress established SBLF in 2010 as a component of the Small Business Jobs Act, which enabled the U.S. Department of Treasury to invest money into qualified small banks to increase lending to small businesses. A new watchdog report by the Office of the Special Inspector General for the Troubled Asset Relief Program states the Treasury invested only $4 billion of the $30 billion available, which means the program did not effectively aid small business owners as much as expected. In addition, 137 banks out of the 332 that entered the SBLF program used those funds to pay back bailout money.

The government bailed out community banks in 2008 and 2009 under the Troubled Asset Relief Fund (TARP), and 132 of 137 of former TARP banks enrolled in the SBLF program have not increased small business lending, the report shows. Instead, many of those banks have been using the small business lending program and government funding as a means to exit TARP, rather than to help small business owners obtain proper funding, according to CNN Money.

The Office of the Special Inspector General for the Troubled Asset Relief Program conducted the audit to examine how two-thirds of the $4 billion in funds went to 137 TARP banks, which in turn used the $2.1 billion in government money to exit TARP in 2011. During this time, non-TARP banks received $1.2 billion in funds and actually increased small business lending by $4.2 billion, while the bailed out banks used 80 percent of the money to pay back TARP.

“The [program] objective was not to pay down TARP bailouts,” CNN Money reported Rep. Sam Graves, who chairs the House Small Business Committee, said.  “This is another example of an inefficient government gone awry.”

Treasury argues SBLF increased small business lending

In a response, the Treasury stated there is nothing faulty about the way the banks used their funds. The agency argued that it is inaccurate for the watchdog report to call the program ineffective because 84 percent of TARP banks did indeed increase their small business lending. Small business loans reportedly increased by 18 percent, which meant an additional $3 billion  – $1.13 for every dollar received – was lent to small business owners. An estimated 24 bailed-out banks that were part of the SBLF did not increase their small business lending at all.

Senior Executive Vice President of Frost Bank in San Antonio, Cliff McCauley, who steered clear of the government program told CNN that the audit findings were inevitable because bailed-out banks have been desperate to repay the costly bailout funds issued by the government.

Small business owners who did not benefit from the SBLF program may want to contact National Funding to obtain a small business loan or merchant cash advance.

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