The U.S. Treasury Department’s community bank fund will dole out an additional $253 million in cash to more than a dozen small banks across the country as part of its mission to encourage lending to small businesses and ignite job growth.
The Treasury announced its plans to extend the cash to 20 community banks across the country through its Small Business Lending Fund (SBLF), which was signed into law back in 2010.
A statement issued by the Treasury Department indicated more funding announcements would follow in the next few weeks. This particular round of funding with boost to total amount of fund contributed to community banks through the SBLF fund since it was established up to $590 million.
The SBLF is a $30 billion fund that provides capital to community banks with assets of $10 billion or less. According to the Treasury, profits paid out the federal government on SBLF funds borrowed begin at 5% and are reduced when these financial institutions expand their lending activities. Similar to the Troubled Asset Relief Program that funded traditional banks, community banks that enter the SBLF program can exit it by repaying funds they’ve been provided in addition to any dividends reaped.
Small businesses employ more than half of America’s workforce and account for 60 percent of gross job creation, according to the Treasury.
“Access to capital is critical to ensuring small businesses can invest, expand, and hire in their local communities,” said the fund’s Deputy Secretary Neal S. Wolin in a statement. “These funds will help unlock credit for Main Street entrepreneurs to support private sector growth and job creation.”
In mid-July the SBLF fund announced plans to extend $214 million to 17 community banks, with Eagle Bancorp. of Bethesda, Md. receiving the most funding at $56.6 million.
The U.S. Treasury also controls the Community Development Financial Institutions Fund and announced plans to provide $142 million to community banks through the fiscal year 2011 in late July. JP Morgan Chase also invested $100 million in community banks in increments of between $2 million and $5 million this past January.