Small business owners – keep your eye on Washington. Stay awake because something good may finally be coming your way. On September 14th, the Senate finally surmounted the roadblock and paved the way for passage of the Small Business Jobs and Credit Act of 2010. The President has now signed that bill. For those who have “tuned out” from desperation, something is finally happening in Washington that could end up dispersing needed capital, in the form of business loans, to the 28 million small businesses across the country. Let us roll up our sleeves and figure out what banks might be lending under this program.
First, some basic facts. You may have heard the upshot of the bill is for the US Treasury to disperse up to $ 30 billion to the states, which in turn will lend monies to small banks for these loans. Washington has been so turned off by the handouts to the large banks, that they specifically devised the legislation only for small banks that have assets of $ 10 billion or less. The money would be lent out at a certain interest rate and the banks would loan, in turn, at higher rates to the business owners. So far so good – the concept makes sense.
So, what kinds of institutions might be loaning you money? Here is a summary.
Section 102 (9) of HR 5297 defines eligible lenders who have assets of $ 10 billion or less. They list the followings:
1) Insured Depository Institutions. This is a fancy word for the average community bank that has tellers, savings and business accounts, mortgages, credit cards, makes business loans (hopefully!), And the like.
2) Savings and Loan Institutions. To the layman, there is very little difference between walking into your usual bank and a savings and loan. Although they are subject to different regulations, they are almost indistinguishable to your everyday community lender in town.
3) Small Business Lending Company. Now this is where it gets interesting. Section 102 (15) defines a small business lending company as a concern that makes commercial loans. In turn, section 102 (20) defines such a lender under the Small Business Act (15 USC 636 (a)), which are SBA lenders. Bingo. SBA lenders are the banks that traditionally like to loan to small businesses and are empathetic to their needs. But unfortunately, these lenders were removed from the bill a couple of days before enactment. But the other lenders are available.
Granted, it may take some time for the money to sift down. After all, we are dealing with both Federal and state bureaucracies. But there is a definite sense of urgency in Washington, so hopefully the process will be expedited.
It goes without saying that banks on the “FDIC problem bank list”, either now or within the last 90 days, are not eligible. The last thing we need is feed dwindling capital to banks that do not deserve to receive it in the first place.
And this is what it means if you are waiting in line for such money. If a bank is already small business friendly, it will provide even more incentive for disbursement. And, there are going to be a number of banks who will justifiably capitalize on this new program and maybe even compete for your loan. Now would not that be a welcome change. Stay turned.