Community Bankers Association of Illinois

Senate Passes Small Business Lending Fund as Part of Jobs Act

The Community Bankers Association of Illinois applauds the United States Senate for passing the Small Business Jobs Act (Jobs Act) of 2010 (H.R. 5297) by a vote of 61 to 38. Both Illinois Senators Durbin and Burris voted in favor of the bill and we thank them for their support. This legislation includes the $30 billion Small Business Lending Fund (SBLF) which was a top CBAI policy priority. The United States House passed this measure on June17th by a vote of 241 to 182. Now, the differences between the two versions need to be resolved prior to final passage. CBAI will continue to work with lawmaker to help craft the final legislation in the most beneficial way for community banks.

CBAI was an early and enthusiastic supporter of the Small Business Lending Fund. At a press conference in Chicago in February, CBAI leadership bankers joined with Senator Durbin and small business owners to announce this important legislative initiative. This spring, CBAI members visited Washington, D.C., on several occasions to voice support for H.R. 5297. We were pleased to see its passage first in the House and now in the Senate. We are confident this legislation will encourage additional small business lending, fuel jobs creation, and help create economic stability.

The SBLF provides a capital option for community banks to expand small business lending. The $30 billion fund could be leveraged to provide as much as $300 billion of credit. Community banks are well-positioned to leverage the SBLF and have established relationships with small businesses in their communities to get credit flowing quickly. Under the $30 billion fund, interested banks with less than $1 billion in assets could receive capital investments up to 5 percent of their risk-weighted assets, and those with between $1 and $10 billion in assets could receive up to 3 percent. The structure of the SBLF program will create powerful incentives for community bank recipients to lend. Banks that increase their small business lending will get a lower dividend rate, as low as 1 percent for banks that increase their lending by 10 percent. Banks that do not increase their lending will pay a higher dividend rate, as high as 7 percent. CBAI joined with 29 state community bank trade associations to support the SBLF in a July 21st letter to Senate Leaders Harry Reid (D-NV) and Mitch McConnell (R-KY).

CBAI will also continue to urge lawmakers to include the Loan Loss Amortization (LLA) proposal in the final legislation. The LLA proposal would allow banks to amortize commercial real estate loan losses for up to 10 years for regulatory capital purposes only. This practice would not distort banks' GAAP-prepared financial statements and will enable many community banks to weather the current crisis. Community banks are not seeking a taxpayer-funded bailout, but only asking for the time to recover from the effects of the mortgage meltdown, financial crisis and great recession that they did not cause.

Key provisions of the Jobs Act include:

    $30 billion capital lending fund for interested community banks to support greater small business lending.
    Higher SBA loan guarantee levels, larger loan size limits and reduced borrower fees.
    Shorter "S" Corporation holding period to mitigate the built-in gains tax.
    Increased small business immediate expensing up to $500,000 over two years and 50% bonus depreciation.
    Enhanced small business export promotion and SBA trade finance incentives.

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