WASHINGTON — Nine months after he first proposed the idea, President Obama signed a bill on Monday that would create a $30 billion small business lending fund to provide capital to community banks to spur lending.
The bill also contains $12 billion in small business tax cuts and extensions of Small Business Administration guarantees, but the lending fund was the most controversial element.
"The small business jobs bill ... will help provide loans and cut taxes for millions of small business owners without adding a dime to our nation's deficit," President Obama said last week after the legislation passed. "After months of partisan obstruction and needless delay, I'm grateful that Democrats and a few Republicans came together to support this common-sense plan to put Americans back to work."
The House passed the package last Thursday and the Senate passed it on Sept. 16. The administration is expected to begin working on term sheets for the program within a week and money from the lending fund could be distributed to banks within two to three months.
Under the program, banks with less than $10 billion of assets can apply for capital with an initial dividend payment of 5%. That required dividend would drop, however, as banks boosted their small-business lending. For example, if banks increased such lending by 10% after a year, the dividend would fall to 1%.
