Small Business Lending Fund
Enacted into law as part of the Small Business Jobs Act of 2010 (the Jobs Act), the Small Business Lending Fund (SBLF) is a $30 billion fund that encourages lending to small businesses by providing Tier 1 capital to qualified community banks with assets of less than $10 billion. Through the Small Business Lending Fund, Main Street banks and small businesses can work together to help create jobs and promote economic growth in local communities across the nation.
Benefits to the Nation’s Economy
Small businesses play a critical role in the U.S. economy. They are central to creating jobs and restoring our economic prosperity.
The Small Business Lending Fund enables community banks across the nation to help small businesses put Americans back to work.
How the Small Business Lending Fund Works
The Small Business Lending Fund aims to stimulate small business lending by providing capital to participating community banks.1 The price a bank pays for SBLF funding will be reduced as the bank’s small business lending increases.
Because banks leverage their capital, the Small Business Lending Fund could help increase lending to small businesses in an amount that is multiples of the total capital provided to participating banks. These new loans will enable small businesses to grow and create new jobs.
The U.S. Department of the Treasury will provide banks with capital by purchasing Tier 1-qualifying preferred stock or equivalents in each bank.
The dividend rate on SBLF funding will be reduced as a participating community bank increases its lending to small businesses. The initial dividend rate will be, at most, 5%. If a bank’s small business lending increases by 10% or more, then the rate will fall to as low as 1%. Banks that increase their lending by amounts less than 10% can benefit from rates set between 2% and 4%. If lending does not increase in the first two years, however, the rate will increase to 7%. After 4.5 years, the rate will increase to 9% if the bank has not already repaid the SBLF funding.
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