Month: September 2011

US Small Business Lending Program Disburses $4 Billion

September 30, 2011


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–Treasury Department announces final tranche of Small Business Lending Fund awards.

–Congress last year allocated $30 billion for the program.

–Community bankers frustrated with the execution and implementation of the program.

(Adds details and comments throughout.)

WASHINGTON -(Dow Jones)- The Obama administration on Wednesday announced a final round of funding under a program to spur loans to small businesses, though total disbursements have left billions of dollars untapped, and many banks have been left wondering why they didnt qualify.

President Barack Obama signed the Small Business Jobs Act in September 2010. The laws centerpiece was a $30 billion fund targeted at community banks in an effort to increase their lending to smaller companies.

The Treasury Department on Wednesday announced 141 community banks received more than $1.6 billion in the final wave of funding, pushing the total disbursed to more than $4 billion for 332 financial institutions.

Billions of dollars in SBLF funds are now being put to use in communities all across the nation, spurring small business growth and job creation, Deputy Treasury Secretary Neal Wolin said in a statement.

Still, many more banks applied, only to be confused and ultimately rejected by the process.

The program is a mixed bag, said Paul Merski, chief economist at the Independent Community Bankers of America, a trade group for almost 5,000 financial institutions.

The banks that received funds will be able to lend more at reasonable terms, probably creating jobs, Merski said.

But Treasury did a poor job explaining why many banks were rejected. So theres also been quite a bit of frustration with the execution and implementation of the program, Merski said.

Treasury said it received 933 applications requesting $11.8 billion in funding, though more than 40% failed to meet minimum requirements to participate.

Some Republicans are more critical.

It has been disappointing to follow the poor performance of Treasurys Small Business Lending Fund, said Rep. Sam Graves (R., Mo.), chairman of the House Small Business committee.

Graves said the Obama administrations efforts to help small business have been off target–rather than stimulus, companies need fewer regulations, a reformed tax code and measures to help consumer confidence.

The Treasury Department defended the program, saying it developed a thorough review process that safeguards taxpayer dollars. Treasury has approved all institutions qualified for taxpayer investment and well-positioned to extend credit to businesses in their communities, Treasury said in a report on the lending fund.

And banks that received funds say they will be able to boost lending.

We will use this new capital to lend to qualified small businesses who intend to create new jobs, said Richard Sanborn, president and chief executive of Seacoast Commerce Bank (SCCB). The Chula Vista, Calif., bank received $4 million in SBLF funds.

Small banks that draw from the fund will make repayments at different interest rates, ranging from 1% to 5%. Banks that increase their small-business lending by at least 10% would pay the lowest rate.

The Small Business Jobs Act stipulates that lenders must have less than $10 billion in assets to participate in the fund; there are about 7,400 in the country.

Lending from such institutions has tumbled since the financial crisis. Outstanding loan balances at banks with $10 billion or less in assets was $1.799 trillion at the end of the second quarter this year, the lowest figure since the end of 2004, according to Federal Deposit Insurance Corp. figures.

Copyright copy; 2011 Dow Jones Newswires

Small business lessons from an open source art exhibit

September 29, 2011


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A unique approach to an art exhibit in Grand Rapids provides important lessons for business owners: Dive into something small and see what you get.

By Vickie Elmer, contributor

FORTUNE — With a small staff, cell phones growing reach, and the convenience of his familys foundation money, Amway heir Rick DeVos launched a novel, open-source art competition and festival called ArtPrize in Grand Rapids, Mich. in 2009. The event attracted more than 200,000 visitors in its inaugural year, and the group expects that to grow to some 500,000 this year.

What makes ArtPrize a standout? Instead of using a traditional jury to decide which art to accept for exhibition, ArtPrize has opened up the selection process. It offers businesses and artists a website to match up with each other. The result: Art in homeless shelters, bars, shops, on the streets, even sitting in the middle the Grand River. Almost all the prize money is awarded by public vote; after registering at an ArtPrize location, people can choose their favorites by text message or on ArtPrizes website. Last year, 465,538 votes were cast.

The notion of opening up traditionally closed organizations continues to gain relevance, to the point that it has almost become an expectation among consumers. So why not apply it to an art festival?

DeVos discusses how ArtPrize — which runs through Oct. 9 — and its model could be useful to businesses and business leaders. An edited version of the interview follows.

Fortune: What lessons have you learned from ArtPrize that corporations also could find useful?

Rick DeVos: Really great things happen when you create a light-weight framework and let people go. A lot of individuals making small bets is better than a centrally planned effort.

We created as few rules as possiblehellip;. The more I can help empower people to create their own creative endeavors, the better off the system will be. An artist will see the side of a building and see the potential that would never occur to me.

What has surprised you about launching ArtPrize?

We expected 20 to 30-year olds to show up with their smartphones. Who actually showed up [at ArtPrize] was so much wider than that –older couples and families with toddlers. We didnt even think about kids coming to ArtPrize. We didnt even have kids T-shirts.

Was there a moment in which you thought you were onto something?

Grand Rapids has a river running through the edge of downtown with a pedestrian bridge that most days is really quite dead. Only one or two people at a time go across. Then during ArtPrize, suddenly, we hear hundreds if not thousands of people are streaming across it. [The river had art installed all along it.] Theyre talking about what they want to see, where to go. When people are going out to dinner — every single conversation is what they wanted to see, what they had to see, what they had already seen.

The notion of letting go can be incredibly difficult to stomach, especially for business managers. Can you describe why you believe its essential to your project?

The less we do, the better for the event overall. The more we can create a framework that empowers people and connects people, theyre going to create things of hellip; much more value than we could without building some huge team and process. That allows all sorts of relationships between artists and business owners, venues and sponsors to spring up. I struggle to even catalog everything that happens in these two and a half weeks.

How do you think managers can develop more of an appreciation, or at least an acceptance, of letting loose some controls?

Just encourage folks to try small scale experiments, not bet the future of the firm on open source. Find ways to open up their process around a particular product or service on a small scale and see how it works. Youre going to be really invigorated by the response you get. Dive into something small and see what you get.

What would you say stands in ArtPrizes path to becoming a financially sustainable project with an operating budget of close to $3 million?

Were on track to become a sustainable organization. Weve created a new model for an art event. We could make some bad decisions on how we run it, and set up the rules. We need to put as few organizational blocks in front of them. You need to have humility about your own ability to plan things.

Have you seen any effects so far from ArtPrize?

The overall goal of ArtPrize is to shift the culture of west Michigan to one that embraces creativity. Weve already seen other events pop up in Grand Rapids — a comedy festival informed by ArtPrize, and a hub where various businesses bring their creative teams together to rub shoulders. Anecdotally, we hear people who are more excited about art and creativity and design then they ever have been before. I see entrepreneurs and artists and ArtPrize existing in a similar realm — its about trying things. They both think theyre crazy. Then they try it – and it works.