WASHINGTON — Community banks participating in a government program upped their lending to small businesses by $7.4 billion over baseline levels during the third quarter, according to a report released Tuesday by the Treasury Department.
That figure was $740 million higher than the previous quarter, and the sixth consecutive quarter in which Small Business Lending Fund participants, which receive government capital in exchange for a commitment to boost lending to small businesses, have boosted such lending, according to the report. Treasury said that community banks had "substantially" increased their business lending compared to peers that did not participate in the program.
"Community banks participating in the Obama Administration's Small Business Lending Fund have consistently increased small business lending over the past two years, resulting in increased access to capital for thousands of small and family-owned businesses across the country," said Treasury Deputy Secretary Neal Wolin in a press release. "With the help of lending supported by SBLF, these small businesses continue to grow and create jobs in their neighborhoods."
The fund was created by the Obama administration in 2010 to help community banks continue to provide credit to small businesses, especially following the aftermath of the financial crisis. It also allowed hundreds of smaller banks to escape the Troubled Asset Relief Program by converting their government capital to the SBLF fund instead.
To date, the U.S. government has invested more than $4 billion in about 330 institutions through the program.
Critics have charged that the government did not let enough banks participate in the program, and that some institutions are artificially lowering interest rates on loans in order to attract as much new business as possible. Under the SBLF, participating banks pay less in dividends depending on the number of small business loans they originate.