A new report by the U.S. Treasury Department shows Alabama banks have now lent $566 million to small businesses through the Treasury's Small Business Lending Fund.
The national program is open to community banks -- defined as banks with less than $10 billion in assets -- and community development loan funds (CDLFs). SBLF began in 2010 as part of the Small business Jobs Act to encourage community banks to increase lending for small businesses, which might in turn create more growth and more jobs. The Treasury has invested more than $4 billion in 332 institutions, which have since increased lending by $7.4 billion overall and $740 million during the past quarter. The department says participating banks have lent more to small businesses than nonparticipating banks of similar size.
Like other loans, the funds borrowed by banks need to be repaid, but there is an incentive to using this added liquidity, according to John Kottmeyer, a banking professor at Samford University's Brock School of Business. There is a correlation between the amount of lending and the interest rate on the loan, and if a bank increases its small business lending by 10 percent, the rate can drop to as low as 1.5 percent.
"It's really a well thought out program," Kottmeyer said. "This is one of those kind of rifle shots, where it's a very specific program for a very specific sector: lenders who didn't have access to funds. It's one of those targeted approaches that seems to be working fairly well."
Nearly a half-dozen Alabama banks have participated in the program:
- BancIndependent, Inc. in Sheffield ($30 million borrowed)
- First Partners Bank (SouthCity Bank) in Vestavia Hills ($5.2 million)
- ServisFirst Bancshares, Inc. in Birmingham ($40 million)
- Southern National Corp. in Andalusia ($6 million)
- Southern States Bancshares, Inc. ($7.492 million)