Area participants in the Small Business Lending Fund upped lending to mom-and-pop operations by nearly $500 million in the fourth quarter, according to a report by the Treasury Department.
The fund, part of the Small Business Job Act of 2010, doled out more than $4 billion to 332 community banks, credit unions and community development financial institutions across the country. In exchange for funding, banks issued shares of preferred stock to Treasury.
Fourteen recipients of the fund are located in Maryland, Virginia and the District. Those in Maryland increased small-business lending by $234 million, in Virginia by $245.1 million and in D.C. by $1.3 million, federal figures show.
As a whole, institutions participating in the fund have increased lending $4.8 billion over baseline levels — the average lending reported in the four quarters before the implementation of the fund.
Bethesda-based EagleBank, for instance, reported a 44 percent spike, or an additional $183.8 million, in lending to small businesses, in the form of commercial and industrial as well as owner-occupied real estate loans, in the final months of 2011. It received $56.6 million in funding from Treasury.
“We have always been a very active commercial lender to small businesses,” said Michael Flynn, chief operating officer at EagleBank. “But to continue, there are two critical factors” — having enough money on hand to back existing loans and then having additional money to lend out.
On both scores, the lending fund “has been quite helpful,” he said.
Not every participant in the fund reported lending growth. At Howard Bank in Ellicott City, lending in the fourth quarter declined 5.4 percent, or $6.5 million, from a baseline level of $120 million. Officials at the bank, which received $12.5 million in SBLF funding, did not return calls for comment.
Banks that engage in a lot of small-business lending are eligible to repay the government with a 1 percent dividend rate, but that rate could jump to 7 percent if lending does not increase in the first two years.
Critics have complained that Treasury narrowly defined what counted as a qualified business loan, an important criteria for determining the repayment terms on the capital. They argue, for example, that barring the government-guaranteed portion of Small Business Administration loans from counting as new lending activity was unreasonable.
The agency’s detractors also complained about delays in making funds available, pointing to a three-month lapse between the time SBLF was enacted and Treasury began accepting applications. Each application then had to be approved by the bank’s primary supervisor, triggering more delays.
Applicants and some members of Congress said the slowness limited the effectiveness of the fund. But Treasury officials said the new report showed the effort was paying off.
“This report shows that the [SBLF] is having a powerful impact,” Deputy Secretary of the Treasury Neal Wolin said in a news release. “The program is helping spark new lending to local entrepreneurs looking to invest in their businesses and create new jobs.”
Total amount of SBLF funds distributed in 225 loans in the first two quarters of the fiscal year by 37 community lenders in the Washington region, according to SBA data.