By Emily Maltby, Wall Street Journal (Blog), August 17, 2011

A government initiative aimed at spurring small-business lending has barely gotten off the ground – with just over a month before the program expires.    

Last September, Congress passed legislation that created a $30 billion lending fund for community banks. The idea was that the banks could tap the fund to boost lending to small businesses.    

In a letter sent to the Federal Reserve last week, the Independent Community Bankers of America, a Washington lobbying group, urged for a speedier roll out of the funds. The Treasury has disbursed only $590 million, according to the letter.    

The Small-Business Lending Fund has had a bumpy ride from the start. Bankers were wary about taking the funds from the get-go. Less than 900 community banks of the eligible 7,700 banks ultimately applied, requesting $11.6 billion of the $30 billion available. The Treasury began approving applications in July, less than three months before the program is set to expire, on September 27. Since then, the approval process has been moving glacially.    

In its letter, the ICBA said that the Federal Reserve is holding up the process. The Fed, which regulates the banks, has to evaluate whether the applicants will be able to pay dividends to the Treasury on the funds they take. Community banks have reported to the ICBA that the Fed “is simply refusing to address the dividend waivers,” according to the letter.    

UPDATE: The Treasury today announced the approval of an additional 37 banks, bringing the total disbursed funds to about $1 billion. In the statement, the Treasury said funding will be made on a rolling basis in the weeks ahead.