Senator asks White House to hammer bailed-out banks that refuse to help small businesses

August 27, 2009

TALLAHASSEE, Fla. – America’s big banks took billions in bailout money, with officials hoping it would spur lending.  Wrong, at least in the case of small businesses.

Across Florida and in many other places around the country anger is mounting because small business owners say the banks are refusing to help them obtain loans even when they are government-backed and there’s no risk to the banks.

And with tension mounting U.S. Sen. Bill Nelson of Florida today asked President Barack Obama to step in to get the banks to start lending. 

In a letter to the president, Nelson said he had been approached by business owners from across the state who were having trouble finding banks that would loan them money through a new government program aimed at helping small businesses.  What’s more, Nelson added, the list of banks not providing the help includes two of the biggest recipients of federal bailout money – Bank of America and Citigroup.

 “At a time when our largest financial institutions are being sustained on the backs of American taxpayers, it’s appalling to know that so few lenders are willing to help keep small businesses on their feet by extending risk-free loans to eligible borrowers,” Nelson wrote.

The government’s $255 million America’s Recovery Capital (ARC) loan program was launched in June by the Small Business Administration and aims to help many viable small businesses temporarily get through the economic downturn by providing them with zero-interest, no-fee loans of up to $35,000.  The program relies on banks to lend the money to small business owners.  In return, the loans are 100% federally guaranteed so banks that offer the money don’t have to worry if a loan goes bad.  And, the government pays interest on the money banks lend.          

Despite the incentives, the lending program has gotten off to a slow start due to the banks’ refusal to offer the loans.  As a result, less than 10 percent of the money had been distributed by the end of July.  In Florida, a state with nearly two million small businesses, only 65 such loans have been issued to date– a figure Nelson called “pitiful”.

In the letter, Nelson also asked the president to get the government to look into reports that banks were aggressively marketing high-interest-business credit cards to small businesses seeking help.  Specifically, Nelson wants to find out if banks are engaging in the practice in lieu of offering the no-interest, government-backed loans.  

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