Reaction to President Barack Obama’s announcement of new initiatives to stimulate lending to small businesses has been mixed in Maine.
The president on Wednesday announced he would ask Congress to increase the caps on Small Business Administration loans and provide easier access to Troubled Assets Relief Program, or TARP, funding for smaller banks.
In a state like Maine, where 90 percent of the businesses employ fewer than 20 people, the added availability of cash and credit for small businesses is a positive sign, according to Dana Connors, president of the Maine State Chamber of Commerce.
“On the face of it, the fact that they are thinking about us, is encouraging and positive,” Connors said Thursday.
While a tighter regulatory environment has stifled some lending, even though most Maine banks have ample capital, Connors said increasing the limits on the SBA loans might be a real benefit to some Maine businesses. Many businesses have cash needs that are near or just over the current lending limits of those SBA programs, he said. Increasing the limits could make those programs available to those types of businesses and stimulate lending.
Joseph Murphy, president of Bar Harbor Bank & Trust, shared that view.
Raising the borrowing limit on some SBA loans from $2 million to $5 million could be a positive change for Maine, he said.
“That has some legs,” Murphy said. “Increasing the limits from 2 [million] to 5 million could enable some deals to be done that might not be done otherwise.”
Businesses that borrow in that range, he said, are businesses that are going to create jobs.
There is, however, some reluctance to borrow in the current economic climate, and perception may play a role when business owners decide whether or not to borrow.
As for the president’s plan to make TARP funds available at lower rates, Murphy said Bar Harbor Bank & Trust would not be affected at this time.
BHBT participated in an earlier TARP program that worked well for the bank and for the communities it serves, he said. But the bank already is actively lending and has adequate capital on hand to back that lending, he said.
While the lower interest rates proposed are attractive, he suggested that the president’s plan is more designed for the much smaller and more numerous banks in the Midwest and far West or for institutions that are having difficulty attracting capital and not for healthy New England banks.
On the other hand, Murphy said, SBA has been a key partner with Maine banks and has provided the funding guarantees that have jump-started a lot of businesses in the state.
Some Maine banks may be leery of tapping the newly available TARP funds, according to Chris Pinkham, president of the Maine Association of Community Banks.
There is still the stigma of “bailout” attached to TARP funds, even though those funds have gone to some healthy financial institutions in Maine in an effort to increase lending, Pinkham said.
Also, although Maine banks have capital to lend, some have been hampered by new credit standards that some applicants have difficulty meeting, he said. And some businesses are simply waiting for more concrete signs of economic recovery before they make the decision to borrow.
“For an awful lot of businesses in Maine the owner and often the family are involved in all aspects of the business,” he said. “A lot of those people are hesitant to take on that debt.”