Punch line: Yesterday, the President was touting his next great stimulus package — ostensibly to help small businesses.
But, the $30 billion small community business lending program faces a big challenge: many of the community banks and businesses it’s supposed to help don’t want it.
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The legislation contains a mix of tax cuts and credits aimed at helping small businesses. The centerpiece of the bill is an effort to make billions of dollars available to community banks for loans to small businesses.
It seems like a simple effort to unclog a credit pipeline that has been blocked since the financial meltdown two years ago.
But interviews with community bankers, as well as small business owners, show a reluctance to participate.
Bank executives say their customers don’t want loans, even at low interest rates, because the sluggish economy has chilled expansion plans.
Some say the federal money isn’t worth it because they fear it will come with too many strings attached, too much regulatory oversight, and too much uncertainty.
“The rules can be changed any time.”
“We have taken a strategic decision not to have our primary regulator, the government, also be a partner in our bank.”
The fears stem from what happened under TARP, the Troubled Asset Relief Fund, formed at the height of the financial meltdown to pump money into banks. Banks that accepted TARP money had to later cut dividends to shareholders and limit compensation to top executives. They were also penalized for early repayment.
Banks said they already has enough capital to meet the paltry demand for loans.
“Our business customers are mired in uncertainty and are reluctant to invest in their businesses”
91% of small business owners surveyed said all their credit needs were met. Only 4 percent cited a lack of financing as their top business problem.
Plans for capital spending were at a 35-year low.
“The crucial questions facing business owners are does it make sense to make an investment right now, and will it generate positive returns?”
“Many of our clients, business owners, put their projects on ice in 2008 because their job number one is to see their company through to the other side of this economic crisis.”
Source: Associated Press:
http://apnews.myway.com/article/20100925/D9IEME2G0.html
The Homa Files 