Congressional Research Service

The Small Business Lending Fund Congressional Research Service

Publisher Marketing: Congressional interest in small business access to capital has increased in recent years because of concerns that small businesses might be prevented from accessing sufficient capital to enable them to assist in the economic recovery. Some, including President Obama, have argued that the federal government should provide additional resources to assist small businesses in acquiring capital necessary to start, continue, or expand operations and create jobs. Others worry about the long-term adverse economic effects of spending programs that increase the federal deficit. They advocate business tax reduction, reform of financial credit market regulation, and federal fiscal restraint as the best means to assist small businesses and create jobs. This report focuses on the SBLF. It opens with a discussion of the supply and demand for small business loans. The SBLF's advocates claimed the SBLF was needed to enhance the supply of small business loans. The report then examines other arguments presented both for and against the program. Advocates argued that the SBLF would increase lending to small businesses and, in turn, create jobs. Opponents contended that the SBLF could lose money, lacked sufficient oversight provisions, did not require lenders to increase their lending to small businesses, could serve as a vehicle for Troubled Asset Relief Program (TARP) recipients to effectively refinance their TARP loans on more favorable terms with little or no resulting benefit for small businesses, and could encourage a failing lender to make even riskier loans to avoid higher dividend payments.