newjerseynewsroom.com

With a filing deadline March 31, seven state-chartered banks have applied for a total of $116 million from the federal Small Business Lending Fund (SBLF), which is making $30 billion available nationally to small banks and encouraging loans to small businesses.

“This fund provides capital to community banks and encourages lending to small businesses, which have traditionally been the engine of job creation,” state Banking and Insurance Commissioner Tom Considine said Thursday. “Through these funds, capital is going to be available to small businesses through community banks and that capital will help those businesses grow and create jobs.”

The Small Business Lending Fund provides capital to qualified community banks with assets of less than $10 billion, which typically devote the highest percentage of their lending to small businesses. The fund is administered by the U.S. Treasury.

Community banks have the opportunity to use the money on business strategies designed to address the needs of New Jersey small businesses.

In the application process, state-chartered banks provide the DOBI with their Small Business Lending Plan, which details their plans for making loans to small businesses. The DOBI then provides the information to the U.S. Treasury.

The Treasury Department will provide banks with money by purchasing preferred stock in each bank. The banks will repay the loans to the Treasury through dividends. Preferred stock is generally stock whose holders are the first to receive dividends from available profit. Preferred stock is redeemed before common stock when a company is liquidated.

The cost to community banks of the SBLF funding will be reduced as their small business lending increases. If a bank’s small business lending increases by 10 percent or more over the calculated baseline, then the dividend rate will fall to as low as one percent.

“I am not saying that this fund is for everyone,” Considine said. “Obviously each financial institution has its own balance sheet, its own strategy and its own situation. But for those community banks looking for capital to make small business loans in their communities, this is an opportunity worth consideration.”

For more information on the program, including how to apply, click here.

– TOM HESTER SR., NEWJERSEYNEWSROOM.COM