The U.S. Treasury’s Small Business Lending Fund (SBLF) has been under-used by the banks it was intended to help, according to Colleen Murray, a Treasury spokeswoman. Of the $30 billion in capital in the program designed to increase small-business lending, only $11.6 billion has even been applied for[1]. And of the 847 banks that did apply for funds, 315 planned to use the funds to replace capital they had received through TARP (the notorious Troubled Asset Relief Program). Todd McCracken, president of the National Small Business Association, credits weak loan demand with the lackluster levels of activity association with SBLF. Lenders are unlikely to aggressively try to increase capital until they receive more loan applications from businesses, he said.

Over the past three quarters, small business lending has steadily declined[2]. Not only are small businesses hesitant to take on more debt, but “big banks” are reluctant to resume lending to small businesses despite “intense political pressure.” Smaller banks have held their small business loan levels steady but, based on participation levels in SBLF, appear unwilling to expand that capacity at this time.

Do you think that banks should make better use of SBLF or is it just one more artificial government stimulus that will ultimately prolong the recovery?

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[1] http://www.bloomberg.com/news/2011-06-16/banks-apply-for-less-than-half-of-small-business-lending-fund.html

[2] http://money.cnn.com/2011/06/16/smallbusiness/small_business_lending/?section=money_latest