Obama small business loans

Posted on by biJay345

Obama small busines Loans was a part of the Small Business Jobs Act, The Small Business Lending Fund (SBLF) was created in 2010.  The total capital earmarked for this fund was $30 billion.  The purpose of this fund was to loan it to the small community banks (with less than 10 billion in assets)  so that they in turn could lend to the small businesses in their community.  This Small Business  Lending Fund was felt necessary due to the fact that banks had been reluctant to loan to the small businesses.  With a fund backed by the Government with this Obama small business loans, it was assumed that community banks would make it easier for small businesses to borrow money.

Part of the provision was that the fund could be leveraged 10 time.  So a 5 million award would end up being up to $50 million in loans to small businesses.

Over the last 15 years , small businesses have created 60% of new jobs.  The Obama small business loans was targeted to help these small businesses. So it is important to help the small businesses if the economic recovery is to take hold.  Unfortunately the Small Business Lending Fund was not  spent in full.  There are over 7,000 community banks in the United States.  Only 933 banks applied.  The total disbursement was only $4 billion to over 300 banking institutions.  Majority of the banks (87%) did not even apply for the funds. The total requested amount was $11.8 billion by over 900 US Banks. The remaining $26 billion went back to the Government’s general fund.


Obama Plan

Reasons for the dismal performance of this Obama small business plan:

1. many small businesses were afraid that since the economy was so bad, if they borrowed money they would  have a difficult time paying.

2. Many of the banks (even those that applied) could not meet the stringent Government requirements.  At a house hearing, Tim Geithner (Treasury Secretary) explained that this was  due to the fact that the Government wanted to be careful how it spent tax dollars.  So the approval process was made stringent.

3. The loan process was very slow. It took nine months to get the first loan approved.

4. Credit Unions not included in this plan.

One of the main reasons cited was that the banks felt that there was a lack of demand for small business loans.  As the economy improves, the small businesses could be more confindent that they will be able to pay additional loans.  So the time might be better now for this type of SBLF.

But according to the Treasury Departmernt,  more that 60% of the institutions the received the SBLF increased their lending by more than 10%.  The increase in lending was about $3.5 billion.  So the Obama small business loans was some what of a success?   Give your views below ..

Banks That Received This Funds through this SBLF Obama plan:

Pompano Beach – Florida Shores Bancorp $12.75 million.

First Federal Bank of Lake City – $20 million

Home banc of Tampa – $7.4 million.


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