While credit has certainly become more available since the end of the recent national recession, many small businesses may not have all the access to the lending they might want or need. This, in turn, could be problematic for many of the nation's banks that accepted taxpayer bailouts.
Nationwide, lenders were able to exit their participation in the Troubled Asset Relief Program as a result of their entering into the initiative's Small Business Lending Fund, which required them to expand credit issuing to independent companies. However, a recent survey of the 137 TARP recipients which were still participating in the SBLF and received some $2.7 billion in funding earmarked specifically for small business lending instead put 80 percent of that money — $2.1 billion in all — toward paying back the bailout program instead, according to a report from TARP'S Special Inspector General. And while as a group the banks met the mandated requirement of lending $1.13 for every dollar received from TARP to small businesses, on a case-by-case basis, the results were far more varied.
For instance, those that received only enough through the SBLF to pay back TARP for the bailout money they received were far less likely to expand small business lending, putting only 25 cents of every dollar received through the program toward such an effort, the report said. Meanwhile, banks that received more than was needed to pay back TARP lent $1.67 per dollar from the program. More worrying for small businesses, though, is that if those that are lagging behind on expanded small business lending do not pick up the slack, there is little recourse for the federal government to take to remediate the issue.
As a result of these findings, SIGTARP recommended that federal banking regulators and the U.S. Department of the Treasury do a better job in the future of improving collaborative efforts in this vein, the report said. Moreover, it called on the Treasury Department to go back and establish achievable goals for lenders participating in TARP to reach with regard to small business lending in the future.
How this affects small businesses
In all, small businesses will likely see little change in the next several months with regard to the availability of credit that might serve to help them expand their operations in the near future. This may be problematic, however, because recent data from the Federal Deposit Insurance Corp. shows that small business lending is on the rise nationwide, growing some $2 billion in the final quarter of last year. What's more, this seems to be only the beginning of something resembling a rebound in borrowing among small business owners, because the figures seen at the end of 2012 were still well below those from just one year prior. Tighter credit availability, consequently, could be playing a role in this, and potentially restraining the ability of small business owners to grow their companies and bring on more workers.
On the other hand, polls have shown that small business owners tend to be more pessimistic these days when it comes to the prospects for expanding and succeeding in the next several months, showing just how important it is for companies to completely assess their standings before they make any major financial decisions overall. One thing that may be weighing heavily on many owners these days is the fact that small business insurance rates seem to be consistently rising, making the price tags for liability insurance, workers compensation insurance and other necessary policies far more difficult to bear.