The Treasury program, called the Small Business Lending Fund, was passed by Congress last September. It aims to provide capital to small businesses at subsidized rates of 1 percent of the loan. Eligibility for the program is available only to lenders with less than $10 billion in total assets, and according to the Treasury Department, is projected to generate up to $300 billion in new loans.
However, only 676 small banks that are organized as C corporations, corporations that are taxed separately from their owners, have applied for the program, taking out a total of $9.5 billion in loans. S corporations, which directly divide profits and losses among shareholders, still have until June 6 to apply for the program.
The Independent Community Bankers of America has stated that there is currently no incentive for small banks organized as corporations to borrow capital from the U.S. Treasury and that this may account for the lack of lending within the program.
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