By Karen Axelton
Good news for small business: President Barack Obama today announced plans that would focus some of the federal government’s $700 billion financial bailout on helping small businesses gain access to capital.
“There is still too little credit flowing to our small businesses,” Obama said in his speech earlier today at Metropolitan Archives, a family-owned small business in Landover, Maryland.
The plan has 3 areas of focus:
1. The Financial Stability Plan will increase small businesses’ access to credit by providing lower-cost capital to community banks with under $1 billion in assets.
The banks will have to submit a plan for how they would use the funds to make small business loans in order to receive the funds; they will also have to submit quarterly reports about their small-business lending activities.
To improve small-business lending in rural and urban communities that have been especially hard hit by the recession, the Plan will make low-cost capital available to Community Development Financial Institutions. Credit unions that qualify as CDFIs will be able to apply for capital injections as well.
2. Legislation: The president announced his support for legislation to increase maximum SBA loan sizes. He urged Congress to:
- increase lending limits on the SBA’s 7(a) program from $2 million to $5 million;
- increase lending limits on the 504 loan program from $2 million to $5 million (for standard borrowers), and from $4 million to $5.5 million (for manufacturing companies); and
- increase Microloan lending limits from $35,000 to $50,000.
3. Conference: The president announced a Treasury-SBA Small Business Lending Conference that would work with regulators, lenders and congress to find additional ways to make credit available for small business. Led by Treasury Secretary Timothy Geithner and SBA Administrator Karen Mills, the conference, to be held in the coming weeks, will discuss further efforts to make sure small businesses have access to credit.
In his speech, Obama said the Federal Government’s Troubled Assets Relief Program (TARP) can now wind down its focus on big banks, which no longer need emergency assistance, and turn to smaller ones. While TARP is set to expire at the end of the year, the administration could ask for an extension until October 2010.
View details of the plan.