Centrix signs up for new small business loan fund

Bedford-based Centrix Bank appears to be one of the first banks, if not the first, to take advantage of the Small Business Lending Fund, a U.S. Treasury program.The bank announced that it will accept $24.5 million at very low interest rates, if its lending results in an increase in lending to small businesses in New Hampshire.The program, part of the Small Business Jobs Act of 2010, sets aside some $30 billion by offering the funds to small solvent banks. The fund is similar in some ways to the Capital Purchase Program (CPP) of the Troubled Asset Relief Program (TARP).TARP was launched near the start of the recession in an effort to shore up troubled banks and encourage lending by having the department purchase the banks’ preferred stock.Both liberals and conservatives alike castigated TARP as a bailout program for reckless big banks, with no strings attached. However, the CPP program was aimed at smaller, secure banks like Centrix, which took about $7.5 million.”Unlike CPP, the new SBLF money is tied to increased lending. The bank has to pay its preferred investor (the U.S. Treasury) a dividend that decreases as the bank increases its lending to small business bands.The initial dividend rate will be 5 percent. If the bank’s small business lending increases by 10 percent or more, then the rate will fall to as low as 1 percent. Banks that increase their lending by amounts less than 10 percent can benefit from rates set between 2 and 4 percent.If lending does not increase in the first two years, however, the rate will increase to 7 percent.After 4 1/2 years, the rate will increase to 9 percent if the bank has not already repaid the SBLF funding.To be eligible in the new program, a bank has to have assets of less than $10 billion, and the institution can’t be on the FDIC problem bank list or a similar list. Centrix said it was “working with the U.S. Department of the Treasury to conclude this new capital purchase, anticipated to occur within the next thirty days.”Joseph B. Reilly, president and CEO of Centrix said the “new source of capital will enable us to continue to serve the small business community through our growing portfolio of commercial lending products and services.” — BOB SANDERS/NEW HAMPSHIRE BUSINESS REVIEW