Few Houston-area banks classified as subchapter S corporations want into the federal government’s Small Business Lending Fund even though advocates are working to include them.
Congress created the fund in September to provide up to $30 billion in capital to community banks nationwide to aid in the generation of small-business loans. For now, the government is only accepting applications from community banks that are C corporations and can issue a stock class different from common stock to the Treasury as part of the transaction. In this case, it is preferred stock, said Bruce Toppin III, a partner at San Antonio-based law firm Kennedy, Toppin & Sutherland LLP. Subchapter S corporations, which can only offer common stock, are not currently eligible.
There are about 16 subchapter S corporation banks in the Houston area, the largest of which is The Woodlands-based Woodforest National Bank, with total assets of $3.2 billion, according to the San Antonio-based Subchapter S Bank Association.