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Small business lending program falls short

Posted by Jason Keith  October 3, 2011 06:00 AM

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In a recent post I cited several studies showing that while public perception was small businesses are unable to get access to credit, the reality is that borrowing is low on the list of small business owners’ priorities.  The numbers showed that a majority of small businesses didn’t need loans or funding, thus demand was low.  Instead they were simply focused on getting more customers, and little else. 

With little fanfare, a lending program launched by the Treasury Department came to a close last week, citing debate over whether or not the program was a “bust.”  Speculation was fueled by the fact that only $4 billion of a possible $30 million was actually lent out.  Reasons for that included lending standards being too high, the process being too cumbersome, or that small business demand for money is simply lower than expected. The program, as part of the Small Business Jobs Act, was designed to funnel $30 billion to local banks that had less than $10 billion in capital. The money was then supposed to be lent out to small business owners to help stimulate growth.  It was considered “cheap money” with low interest rates ranging from 1-5 percent. After more than a full year, only $4 billion was actually distributed. 

Only 933 community banks applied, requesting $11.8 billion.  87% of banks didn’t even apply, citing low demand.  In fact, Treasury said that 40% of banks that applied did not meet the program's basic requirements.

The question is, do small businesses across the country need access to money, in the form of loans, or are they simply more focused on driving customers and thus revenue?  As with the American Jobs Act, which has several provisions aimed at small businesses, do you feel that these government efforts are falling short and not aimed at your most pressing needs? 

This blog is not written or edited by or the Boston Globe.
The author is solely responsible for the content.

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About this blog

Jason Keith has been working for and with small businesses in the New England area for more than 10 years, specifically small, micro businesses. Born and raised in Massachusetts and a former journalist, he provides a unique perspective on the issues facing small businesses locally and nationally.To reach him directly email

This is a personal blog. The opinions expressed here are the author's alone.

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