$30 billion set aside for bank lending; incentives target business investment
NORTH BAY – The passage of HR 5297, the Small Business Jobs Act, established in the Treasury the Small Business Lending Fund of $30 billion and $12 billion in tax incentives intended to spur lending and get small businesses back on their feet.
[caption id="attachment_25957" align="alignright" width="108" caption="Kim Kaselionis"][/caption]
For North Bay banks, there is still uncertainty as to how the $30 billion will be distributed, but, said Kim Kaselionis, president and chief executive officer of Circle Bank, the industry expects there will be a weighted system to determine how much capital each bank could get.
In addition to the $30 billion in capital, which can be leveraged to $300 billion in loans, there is a continuation of the enhancements to SBA lending, such as fee waivers and increased guarantees.
“I think with the combination of SBA provisions and the $30 billion it should be a good injection to small business owners,” said Ms. Kaselionis.
Tom Duryea, president and CEO of Summit State Bank said, “The passing of HR 5297 is a great win for local community banks. Although Summit State Bank has continued to dependably lend to local businesses and nonprofits, any additional programs, like the SBA 7(a) loan program, will only make our local economy stronger.”
He said his sense of this SBA lending is that it is making it easier.
“You have increased the maximum loan size, which is big. It is encouraging because a lot of banks cannot take any more risk. It encourages banks to do more loans,” he said.
Russell Colombo, president and chief executive officer of Bank of Marin, was not quite as optimistic about the benefits of this legislation.
“While we are a business bank and we are clearly in favor of things that help the small business community, and I believe that economic recovery is led by small business and I applaud legislation and efforts to help invest in the future and their business, in the case of this legislation, I think they are just creating TARP 2,” he said.
He said he thinks the efforts are misdirected and there is already plenty of capital, but there is no demand.
“It is not a lack of supply of money to lend, it is a lack of demand from borrowers,” he said.
He feels that reducing the tax burden of small businesses would be a more suitable effort by the government. He also pointed out that just because the banks have more capital doesn’t mean the banks will lend.
Ms. Kaselionis said while there are similarities to TARP, which Circle Bank didn’t participate in, that is not necessarily a bad thing.
Also, different from the TARP, she said, the $30 billion program reduces a bank’s interest rate as it lends the money, although the rules have not yet been established.
“This is a very good incentive for banks to lend out the money,” she said. “You are driving down the borrowing costs by lending to small businesses."