By KENT HOOVER
Washington Bureau

The Treasury Department has extended the deadline for community banks to apply for the Small Business Lending Fund, which will provide up to $30 billion in cheap capital for use in making loans to small firms.

The new deadline for community banks that are C corporations is May 16. The previous deadline was March 31. As of April 4, about 600 banks had requested $8.6 billion in capital.

The Treasury Department is still working on terms for community banks that are S corporations and mutual institutions. Once those terms are complete, it will start accepting applications from them.

The slow start for the program raises questions about how effective it will be in increasing the flow of credit to small businesses.

Some community banks say they have enough capital to meet small-business demand. Other bankers are leery of the paperwork involved in the program, which requires banks to track how much they've increased their small-business lending. Some fear they will be stigmatized by taking this money, just like banks that took Troubled Asset Relief Program money.

Republicans dubbed the program "TARP Jr." when it was debated in Congress. Sen. Olympia Snowe, R-Maine, has introduced legislation that would prohibit banks that received TARP funds from tapping the Small Business Lending Fund.

Sen. Chuck Grassley, R-Iowa, wants assurances from the Treasury Department that banks won't be allowed to use Small Business Lending Fund capital, which is available at more favorable turns than TARP money was, to repay their TARP debts to the government.

The Small Business Lending Fund was created by the Small Business Jobs Act, which was signed into law in September. That legislation also allowed small businesses to refinance their commercial real mortgages through its 504 loan program.

The SBA initially restricted this new refinancing option to small businesses that faced balloon payments on their mortgages before Dec. 31, 2012. On April 6, it opened the 504 refinancing option to businesses with balloon payments due after that date.

"With the collapse of the real estate bubble, many small-business owners have found themselves unable to refinance as a result of inflated real estate values at the time they took out their mortgage," SBA Administrator Karen Mills said.

To be eligible for 504 refinancing, the real estate must be occupied by the owner and the mortgage must be at least two years old.

The business must be current on their payments for the past 12 months.

For more information, see www.treasury.gov or www.sba.gov