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Yesterday, the state of Ohio and Huntington Bancshares announced a joint program to lend $1 billion to small businesses over the next three years. Many small businesses have waited for such initiatives from banks like Huntington that received TARP money.
According to the press release issued by Huntington, Ohio's Governor and the Department of Development, the Ohio and Huntington Job Growth Partnership is a public private partnership designed to "attract, retain and grow businesses and jobs within the state."
As noted by the Columbus Dispatch, the initiative seeks to bolster small business lending, which has lagged despite the infusion of federal money from the Troubled Asset Relief Program into many banks. Huntington received $1.4 billion in TARP money.
Under the new program, $1 billion will be lent to small and medium sized businesses over three years. $250,000 will go through Ohio's Department of Development, and $750,000 through Huntington itself.
According to the Wall Street Journal, Huntington's funds will kick in at the point where state lending limits and restrictions cap loans to small businesses. Partnering with the state, however, allows the money lent by Huntington to match to terms of state loans, featuring lower interest rates. As the first recipient of a loan under the program told the Columbus Dispatch, "[t]he (interest) rate is roughly half of what it would have been. What this means for my business is, it gives me options for expansion."
The program will allow Huntington to provide loans to businesses that have already been approved for funds by state programs whose lending limits have been reached. Huntington brought the idea to the state, but other banks may join the program in the future.
The Journal points out that the chief reason Huntington may want these loans is to improve the quality of loans on its books. Like many lenders, its non-performing loans have caused it to take large hits over the past year. Many have lamented the lack of increased lending after banks got billions in TARP money. It appears, however, that at least in the case of Huntington, more loans to small businesses may be a way to improve bank health. Particularly if they can join in partnerships with states to allow small business lending at lower rates.
Huntington claims it will eagerly put more funds toward the program if the $1 billion is exhausted.
We'll see if Ohio's public private small business lending program truly is a win for all involved. We'll also see whether other banks and other states try similar arrangements.
Meeting with a lawyer can help you understand your options and how to best protect your rights. Visit our attorney directory to find a lawyer near you who can help.