MN Banks Land $12.4M for Small Biz Loans
Two Minnesota banks have together received $12.4 million from the federal government in an effort to bolster small business lending, the U.S. Treasury Department announced on Wednesday.
McLeod Bancshares, Inc., the holding company of First Minnesota Bank in Shorewood, received $6 million, while Redwood Financial, Inc., of Redwood Falls, got $6.4 million.
The money was awarded through the Small Business Lending Fund (SBLF), a $30 billion fund that was created as part of the Small Business Jobs Act signed by President Obama last year. It was created to encourage community banks to ramp up lending to small businesses, and in turn fuel expansion and new jobs. It provides capital to banks with less than $10 billion in assets.
The Treasury Department provides banks with capital by purchasing Tier 1-qualifying preferred stock or an equivalent, according to its Web site. The dividend rate paid on the SBLF funding decreases as the community bank boosts its small business lending-creating an incentive for the bank to lend to small businesses.
For example, the initial dividend rate-up to 5 percent-will fall to as low as 1 percent if a bank's small business lending increases by 10 percent or more.
“These funds will provide a powerful incentive for community banks to expand their lending to small businesses, spurring new investment and job creation,” Deputy Secretary of the Treasury Neal S. Wolin said in a statement. “Breaking down barriers to credit will provide critical support to Main Street entrepreneurs looking to invest in their local communities, grow their businesses, and put more Americans back to work.”
The U.S. Treasury Department said that it will make additional SBLF distribution announcements in the coming weeks.