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SNL Report: Small biz fund's first yearâ€”and how it did

"Son of TARP" program sees loan growth, mergers, redemptions

The Administration opened the tap for small business lending, but only 277 lenders wound up taking part.

By Harish Mali, SNL Financial staff writer

While disbursements under the Small Business Lending Fund were much lower than expected, the banks that chose to participate have fulfilled the program's aim and grown loans at an accelerated pace.

The 277 lenders that accepted SBLF funds grew their qualified small business loans at an average rate of 55.9% over the course of the program through June 30, according to a Treasury report dated Oct. 9.

The SBLF program, a brainchild of President Obama, completed its first anniversary on Sept. 27. The program was enacted into law as part of the Small Business Jobs Act of 2010 (JOBS Act) to provide eligible financial institutions with capital in an effort to boost small business lending across the country.

Treasury had $30 billion available under the program. It received 932 applications for only $11.8 billion, of which only 332 applications were approved for $4 billion in disbursements. Additionally, roughly half of the SBLF bank participants entered the program by exchanging TARP shares for SBLF shares.



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For banks that joined SBLF without first participating in TARP, the program has been a success. The bank participants that did not use SBLF money to repay TARP reported an average growth rate of 90.3% in qualified small business loans as of the second quarter over the baseline, while the average growth rate for the banks that switched from TARP to SBLF was only 19.2%.

The baseline, as defined under the program, is the average amount of qualified small business loans outstanding in the four quarters ended June 30, 2010.

Lending growth
The aggregate qualified small business loans by the 277 bank participants remaining in the SBLF program stood at $41.7 billion at June 30, 2012, an increase of 17.7% over the baseline of $35.4 billion.

The average qualified small business loan growth rate of the bank participants was 55.9% at June 30, compared to 33.8% at March 31. The average qualified small business loan growth rate of TARP-to-SBLF movers was 19.2% at June 30, compared to 15.7% at March 31, while the average growth rate of other SBLF participants was 90.3% at June 30 compared to 50.9% at March 31. Since the dividend/interest rates for a quarter are linked to the qualified small business lending growth of two quarters prior, there was also a wide gap between the dividend rates of both groups. The average dividend/interest rate for SBLF-TARP movers was 2.41% for the fourth quarter, whereas it was only 1.75% for the other participants.

The aggregate loan data reported in the companies' regulatory call reports reveal double-digit growth rates for all loan types as of the second quarter over the baseline. The aggregate commercial and industrial loans were up 31.2% to $23.1 billion at June 30 over the baseline. The agricultural production loans had the second highest growth rate of 24.5% as of June 30.