Congress recently approved a small business lending program as part of broader legislation aimed at helping small businesses. The lending program is designed to make $30 billion in funds readily available for smaller banks to loan to small businesses.
There’s one small problem, as economist Robert Higgs points, out: businesses have little interest in actually borrowing money to invest right now.
Higgs refers to an article which describes how a number of community bank leaders are reluctant to even participate in the program, and how a lack of access to capital is not a problem confronting small businesses.
Ninety-one percent of small business owners surveyed in August by the National Federation of Independent Business (NFIB) said all their credit needs were met. Only 4 percent cited a lack of financing as their top business problem. Plans for capital spending were at a 35-year low
Another article on the legislation reveals other bank leaders describing a lack of interested, qualified small businesses seeking credit.
Still, Ball (president and CEO of Friendly Hills Bank in Whittier, CA) said Friendly Hills won’t be needing to tap into the lending program.
“We do not intend to take advantage of it here at our bank,” he said. “We have plenty of capital and liquidity to lend. The problem we run into is finding credit-worthy borrowers because of the downturn in the economy and what continues to be very heightened regulatory conditions placed on new loans.”
What is needed to spur small business growth and investment?
“What we need to address are the current constraints that are being placed on small businesses,” he said. “The regulations, the taxes and the general economic environment … we’d rather that be the focus than than this legislation.”