To the Editor:
The Small Business Loan Fund, if approved, will not trickle down in any material amount to credit-starved small businesses. Any insolvent small bank that takes these funds will replicate the same cash-hoarding behavior of recipients of Troubled Asset Relief Program funds, thereby creating a new category of financial monster, the Zombie Small Bank.
In the event it does pass, I believe that we still have a fighting chance to mechanically require that these funds actually do end up in the hands of small business.
Many problems exist in the loan program, including but not limited to its current interest rate structure, which is simply inadequate. Any Zombie Small Bank will be more than willing to pay the highest interest rate required for "survival capital" and refuse to lend out these monies to small business, since a 7% dividend is a dirt cheap form of financing.
The best way to get these funds into the hands of small businesses is to require that any beneficiary of the program allocate a material portion of the money to viable nonbank institutions that have a natural incentive to lend it out responsibly to small business. The commercial equipment finance industry is the best and quickest partner to help banks responsibly lend to these borrowers.
We have the national network, talent, up-to-date job skills and the capital to lend this money to job-creating small businesses. All we lack are the bank loans to do our job.
Dale R. Kluga, president
Cobra Capital LLC
Darien, Ill.
