Updated February 07, 2010
In February 2010, President Obama proposed his administration's plan for making small business loans easier to get, thus allowing small businesses to open, expand and, perhaps most importantly, create new jobs.The Small Business Lending Fund
As the foundation of President Obama's plan, a new Small Business Lending Fund, if approved by Congress, would funnel $30 billion from the Troubled Asset Relief Program (TARP) to community and smaller banks to support small business lending. In addition, the Small Business Lending Fund would offer small business lending incentives to the nation's small community banks - the very banks that already make most small business loans. The $30 billion to start the Small Business Lending Fund would come from the TARP bank bailout money being paid back to the U.S. Treasury by the large banks.
"As I have met small businesses owners from across the country, they all stress the same thing - to expand and hire, they need better access to credit," said Treasury Secretary Tim Geithner in a press release. "The President's proposal would take money repaid by the biggest banks and provide it to community banks so they can increase lending to small businesses."
Highlights of Obama's Small Business Lending Fund
Limited to smaller banks: Money from the Small Business Lending Fund would go only to small- to medium-sized banks with total assets under $10 billion. According to the White House, the nation's 8,000 community banks currently make more than 50 percent of all small business loans nationwide.It Really is All About Jobs
Not a Part of TARP: As an incentive to encourage banks to make more small business loans, the funds they receive from the $30 billion Small Business Lending Fund could be loaned to small businesses without being limited by TARP restrictions.
Incentives to Increase Small Business Lending: As banks receiving money from the Small Business Lending Fund increase small business lending compared to 2009 levels, the dividends paid by the banks to the U.S. Treasury on that capital investment would be reduced. In addition, banks that increase small business lending will be allowed to freely leverage the money they get from the Small Business Lending Fund. In this way, says the White House, the banks could end up making small business loans amounting to much more than the initial $30 billion provided by the Small Business Lending Fund.
Looking for More Ideas: While the Obama Administration is asking Congress for the $30 billion to start the Small Business Lending Fund, they will also discuss with Congress additional ideas for increasing small business lending.
Noting the historic power of small, community banks to help small businesses grow and create jobs, SBA Administrator Karen Mills said, "This fund (the Small Business Lending Fund) targets one of the biggest challenges community banks have faced in this recession -- capital to make more loans. This proposal, along with extending the SBA's 90 percent guarantee, can help put small and medium-sized banks back in a position to step up their small business lending and support job creation in their communities."
