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House approves bill designed to spur small-business lending

Many small-business truckers say they are having a difficult time getting the loans they need to stay afloat during tough economic times.

Recently, the U.S. House of Representatives approved the Small Business Lending Fund Act – HR5297 – which is a plan designed to get money flowing into the hands of small-business owners. The Senate is expected to take the issue up soon.

Paul G. Merski, senior vice president and chief economist for the Independent Community Bankers of America – ICBA – told Land Line this program is designed to encourage more banks to lend. He said the number one complaint he has heard from lenders is that bank regulators have been “overaggressive in forcing them to pull back on extending credit.”

He said this $30 billion program may lead to $300 billion in lending and is targeted at community banks with $10 billion or less in assets that typically work with small businesses, including truckers.

“So it’s not going to the Wall Street banks, but it’s going to the banks that actually focus on small-business lending that are in the communities and have relationships with local small-business owners,” Merski said.

In his view, what stands out about this bill is that there are incentives for banks to lend this money once they borrow it from the U.S. Treasury. Merski said that while banks must pay an initial 5 percent dividend on the amount they borrow, that percent can go down to 1 percent if banks increase their small business lending by 10 percent or more.

However, if banks fail to lend the money, Merski said the percentage goes up to 7 percent after two years. If the banks continue to hang onto the money, the rate then goes up to 9 percent after four years and six months.

“So it wouldn’t make any sense for a bank that didn’t have any lending opportunities and the desire to lend to pull down the capital and pay very high costs of that capital,” he said.

Merski said it may be July before the U.S. Senate takes up this issue, along with a number of other small business bills and tax relief measures.

He said what is also unique about the small business lending program is that it doesn’t specify the type of loan or doesn’t limit the dollar amount of the loan.

“This will allow the banks that do the small business lending to do what they do best,” Merski said.

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