U.S. banks got plenty of assistance from Washington in recent hard times. So it would only be fair that they give a hand to struggling small businesses needing a quick cash infusion — especially when the government is basically footing the bill.
In May, Washington unveiled an emergency bridge loan program for small businesses as part of the economic stimulus. With interest-free loans of up to $35,000 due in five years, they expected it to be fully subscribed in months. But the conduit for the program — banks — are dragging their feet.
The New York Times: …the program is off to a slow start, and many banks, including some of the largest, appear reluctant to take part.
With $255 million, the program is prepared to make about 10,000 loans of up to $35,000 each. As of Monday, the agency reported that only 1,127 loans, totaling $36.8 million, had been extended.
While the agency maintains that the program is on track, some in the banking industry say the banks are moving slowly because they have little incentive. “There’s not a lot of profit motive in a $35,000 loan stretched over six years,” said Paul Merski, chief economist for the Independent Community Bankers of America, a trade association.
To be fair, the small businesses have tough criteria to meet — simultaneously struggling yet viable.
But this program seems to be going the way of the mortgage modifications. Without compelling reasons to participate in the program, the banks are going to keep this on the back burner.
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