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By Jeremy Hill and Tonya Vachirasomboon Legislation that could help small businesses get credit is on its way to President Obama’s desk for his signature. Yesterday, the United States House of Representatives passed the Small Business Jobs Act of 2010 (H.R. 5297) (the Bill).  The Bill was passed by the United States Senate on September 16, 2010. It is expected that President Barack Obama will sign the Bill into law early next week.   

A key small business incentive included in the Bill is the Small Business Lending Fund Program (the Program), which includes the Small Business Lending Fund (the Fund).  The Bill provides that the purpose of the Fund is to address the ongoing effects of the financial crisis on small businesses by providing temporary authority to the Secretary of the United States Department of Treasury to make capital investments in eligible institutions in order to increase the availability of credit for small businesses.  The Program is separate and distinct from the Troubled Asset Relief Program (TARP).  The Fund would be capped at $30 billion. Eligible institutions having total assets equal to or less than $1 billion, may apply to receive a capital investment from the Fund in an amount not exceeding 5 percent of risk-weighted assets, less the amount of any Community Development Capital Initiative investment (under TARP) and any Capital Purchase Program investment (under TARP).

Eligible institutions having total assets of more than $1 billion but less than $10 billion, may apply to receive a capital investment from the Fund in an amount not exceeding 3 percent of risk-weighted assets, less the amount of any Community Development Capital Initiative investment (under TARP) and any Capital Purchase Program investment (under TARP). Capital investments received under the Program must generally be paid back within 10 years of receipt and will bear dividends/interest starting at a rate of 5 percent, which may be reduced to as low as 1 percent based on an eligible institution’s small business lending.

The Bill prescribes additional requirements for eligible institutions, including but not limited to, requirements concerning the treatment of holding companies, financial instruments issued to the United States Department of Treasury, and linguistically and culturally appropriate outreach to minorities, women and veterans. For more information, contact the Corporate and Transactional Practice Group at Bingham Greenebaum Doll.

To learn more about Jeremy Hill and his practice, please visit his profile.