Small bank lending program shows progress-US Treasury

WASHINGTON, April 9 Mon Apr 9, 2012 10:58am EDT

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WASHINGTON, April 9 (Reuters) - The Treasury Department on Monday released a report to Congress on a $30 billion small business lending fund aimed at providing credit to community banks, which showed an increase in lending during the last three months of 2011.

The Small Business Lending Fund, which has provided federal capital to community banks with less than $10 billion in assets, gives incentives to participants to extend more loans to small companies as a way to spur growth.

Community banks and other participants increased lending by $1.3 billion in the final quarter of 2011 over the prior quarter, according to Treasury.

The fund was approved by Congress in 2010 due to tight credit conditions for small businesses in the wake of the 2007-2009 financial crisis. Treasury invested just more than $4.0 billion of its $30 billion to 332 community banks nationwide until the program closed on Sept. 27, 2011.

"These increases have a huge impact in their communities where small businesses have more access to lending," Don Graves, Treasury's Deputy Assistant Secretary for Small Business, Community Development and Housing Policy said in a statement.

A majority of banks taking part in the program, more than 68 percent, have increased their small lending by 10 percent or more, according to the report.

The Small Business Lending Fund or SBLF, has received criticism in the past from lawmakers who said the program was implemented slowly and did not have a wide reach.

Treasury has previously said the low participation rate was due to a careful screening process used to disperse taxpayers' money, and there was a small pool of interested and qualified applicants.

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