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Lending is trending up, especially for small businesses

Date posted:  11/17/15 12:00:00 AM It's getting easier to acquire a loan if you are a small-business owner.

It's becoming a little easier to land a loan in Tennessee. Banks from the Volunteer State have reported rising numbers in lending rates since joining the U.S. Treasury Department's Small Business Lending Fund, according to The Tennessean.

The lending program, part of the Obama administration's Small Business Jobs Act, was designed to create jobs and help small businesses acquire loans. It started at a baseline level in 2010 but has climbed steadily since its inception.

According to a treasury report, lending levels have risen to $518.3 million since the program started, with a $99.2 million spike in the third quarter of 2013.

"The Obama Administration's Small Business Lending Fund is supporting Tennessee community banks as they work with local small businesses to fuel our economic recovery," said Mary Miller, Treasury Under Secretary for Domestic Finance, according to The Tennessean.

The program also supplies capital to small community banks with less than $10 billion in assets, delivering a low interest rate between 1 and 5 percent. This allows community banks to lend comfortably after the market was bogged down following the burst of the housing bubble and ensuing recession.

"It was at a time when there was hardly any access to capital for community banks, regardless of whether you were healthy or doing a good job," Jim Rieniets, a bank CEO in Tennessee, told The Tennessean. "It was very attractive to a community bank to have capital to grow and flourish at a very reasonable rate of return. … We have grown our small-business qualifying loans disproportionately in that period of time."

But it isn't all sunshine and lollipops for the lending program. The lending fund has been lambasted for falling short of expectations and for being used by some banks to repay funds borrowed from the government through the Troubled Asset Relief Program.

The fund has doled out cash to 332 lending institutions that first had to qualify for the program. More than $4 billion has been issued, with an expected maximum of $30 billion available for program use.

"It enables us to expand our lending to small businesses," said Ron Samuels, CEO of a Tennessee bank. "We wanted to take advantage of the growth that we were experiencing in this market and we need capital to support that. The SBLF provided that capital."

Small-business loans ballooning
According to the Thomson Reuters/PayNet Small Business Lending Index, the volume of new commercial loans to small firms has increased rapidly since January 2013. The average index figure in 2013 was 110.4, which was a significant increase from the 2012 average of 103.6.

Last year signaled the fourth straight year of loan improvements for small businesses. The average index was 74.2 in 2009, 80.7 in 2010 and 94.6 in 2011, according to The Washington Post. The scores are indexed so that the volume of loans distributed in January 2005 equals 100, meaning the current loan volume has now exceeded pre-recession levels.

"Big banks have begun to feel the pressure to lend more money with the Dodd-Frank reform bill nearing," Rohit Arora, chief executive of Biz2Credit, an online small business lending platform, told The Washington Post. "We should expect to see more changes accordingly in the next year."

According to the Post, some industry experts believe the new legislation will  encourage banks to search for further sources of income or amp up existing ones.

Jeanne Hulit, acting administrator of the U.S. Small Business Administration, told the Post that helping firms acquire the capital they need is good for businesses, neighborhoods and communities.