As if we needed more evidence that TARP has in many cases been more of a TRAP, now a recent story in Bloomberg Businessweek reports that the Congressional Oversight Panel has expressed concerns that some small banks may have difficulty repaying money they received from the program. Any bank that does not repay TARP funds by 2013 will have the dividend payment nearly double from 5% to 9%. This means that those small banks that chose to accept a government handout could very well end up being taken over because they are unable to cover the costs of their decision.
According to reports, currently about 10% of the 690 small banks (assets under $100 billion) that took money under TARP have paid back the government, while 15% are currently behind in repayment. The question is, what is the status of the other three-fourths? How many of them are on track to repay the loans and how many are looking at falling behind? This is no doubt part of what some Senators were concerned about with the new Small Business Lending Act that was just passed out of committee.
A major concern is the possibility that some small community banks could be taken over or forced to close because of problems with raising capital to repay the TARP money they took. The Oversight Panel is recommending that the Treasury Department work to clearly detail how these small banks will be handled. According to the report, one bank has already missed six dividend payments and another eight are five months behind. Missing six payments is supposed to set off a provision in the law that allows the government to replace board members. Just how will this be done, and will it be done in a way that helps the bank or hinders its recovery? Time will tell, as the saying goes.
The good news is that not every community bank took advantage of TARP, and most of those that did are still in relatively stable condition. So there are many out there that are able to work with qualifying businesses, particularly with SBA-backed loans. SBA Loan Store and Francis Financial have worked with a variety of lenders to provide 7(a) and 504 loans to start-up and expanding businesses. If you are ready to grow your business, contact us for advice or to get the process started.
Craig G. Francis is the owner of Francis Financial and The SBA Loan Store. He has been a top producer of SBA Loans since 1981, and has worked with Dun & Bradstreet and Bank of Commerce. Craig Francis has the expertise to steer clients through the often confusing rules and regulations associated with SBA Loans, having helped over 2,000 businesses acquire over a billion dollars in loans. He can be contacted through CraigGFrancis.com, SBALoanStore.com, on LinkedIn, or at 888-666-9722.
According to reports, currently about 10% of the 690 small banks (assets under $100 billion) that took money under TARP have paid back the government, while 15% are currently behind in repayment. The question is, what is the status of the other three-fourths? How many of them are on track to repay the loans and how many are looking at falling behind? This is no doubt part of what some Senators were concerned about with the new Small Business Lending Act that was just passed out of committee.
A major concern is the possibility that some small community banks could be taken over or forced to close because of problems with raising capital to repay the TARP money they took. The Oversight Panel is recommending that the Treasury Department work to clearly detail how these small banks will be handled. According to the report, one bank has already missed six dividend payments and another eight are five months behind. Missing six payments is supposed to set off a provision in the law that allows the government to replace board members. Just how will this be done, and will it be done in a way that helps the bank or hinders its recovery? Time will tell, as the saying goes.
The good news is that not every community bank took advantage of TARP, and most of those that did are still in relatively stable condition. So there are many out there that are able to work with qualifying businesses, particularly with SBA-backed loans. SBA Loan Store and Francis Financial have worked with a variety of lenders to provide 7(a) and 504 loans to start-up and expanding businesses. If you are ready to grow your business, contact us for advice or to get the process started.
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