Small Business Lending Turns Profit for Feds ? Inc. Wire

Funding Posted on February 7, 2012

A program intended to funnel capital into small banks will cost taxpayers less than expected?in part because of its limited reach.

A small business lending program by the Obama administration is set to turn a surprise profit of $80 million, reports CNNMoney.

Designed to pump capital into small banks, the 2010 program?the Treasury Department?s Small Business Lending Fund?was expected to cost taxpayers $1.3 billion.

But the program also had less impact than expected, CNNMoney reports. Only $4 billion of the allotted $30 billion was disbursed to community banks through the program; and only

332 community banks got the lending assistance?although 7,000 community banks were small enough to qualify and 933 banks actually applied to the program.

?Treasury, explaining why the 2010 program is expected to cost less than expected, cited fewer banks healthy enough to qualify, weaker demand for small business loans ?and fewer bank failures,? http://money.cnn.com/2012/01/31/smallbusiness/loans/index.htm?iid=EL>">wrote CNNMoney?s Jose Pagliery. ? But some small business leaders and banks [said] government officials were too stringent about which banks got the money or that banks had trouble navigating the application process.?

The banks interested in the program were required to present a plan of how they would use the money to increase lending to small businesses. For the institutions that made the cut, Treasury essentially became an investor in the bank, offering up lending capital in exchange for dividend payments. ?Abby Tracy

Photo via David Castillo Dominici

Source: http://wire.inc.com/2012/02/07/small-business-lending-turns-profit-for-feds/

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