SmallBizResource Blog -- Government

Obama Loosens Lending To Small Businesses

Posted by Gayle Kesten Monday, Mar 16, 2009, 01:56 PM ET

So I just watched President Obama and Treasury Secretary Timothy Geithner on TV while furiously taking notes on my laptop. In addition to the undeniable revelation that I'm a candidate for bifocals, I thought aloud, "It's good to be Marco Lentine."

That's because Philadephia's 2007 Young Entrepreneur of the Year and Gia Pronto restaurant owner received absolutely priceless publicity when he provided the introduction for our nation's 44th president, who, as I blogged earlier, unveiled his plans to jump-start small businesses' access to the capital we need to keep running. And both during his televised conference and in a briefing just prior with small business owners, President Obama made his disgust for bailout-taker/bonus-distributor AIG clear, saying "All across the country, there are people who work hard and meet their responsibilities every day, without the benefit of government bailouts or multimillion-dollar bonuses."

Yes, people like you and your small business/microbusiness/home-based business/independent contractor brethren, who are responsible for creating 70% of all new jobs in the past decade.

These folks are not looking for a handout, Obama said. "Small-business people are resilient and resourceful given half a chance. But we need the chance," he said, quoting a letter he had received from a small-business owner. To give them that chance, the president said the Treasury Department will commit up to $15 billion to help unlock the credit markets by purchasing small business loan securities currently frozen on the secondary market. "By purchasing these securities, it will unlock these secondary markets, and in turn, free up more capital to jumpstart lending for small business owners," said Small Business Administration Acting Administrator Darryl K. Hairston, in a statement, which bulleted that as of today the agency will:

• Temporarily raise guarantees to up to 90 percent on SBA’s 7(a) loan program, through calendar year 2009, or until the funds are exhausted. This increase in guarantee levels will help provide banks with the greater confidence they need to extend credit during the current recession, will mean more capital available to small business owners around the country.

• Temporarily eliminate fees for borrowers on SBA 7(a) loans and for both borrowers and lenders on 504 Certified Development Company loans, through calendar year 2009, or until the funds are exhausted. This will mean more capital available to small businesses at a lower cost. The fee elimination is retroactive to February 17, the day the Recovery Act was signed. SBA is developing a mechanism for refunding fees paid on loans since then.

Geithner also took the country's banks to task for withholding loans to small businesses, blaming them for helping to create the "current mess" and letting them know they "bear a special responsibility to help get us out of it." As part of that, the top 21 banks will be required to report on a monthly basis how much they've lent to small businesses.

According to a new Intuit study out today, access to capital (PDF) is among the many factors that "increase, improve, and amplify small business innovation efforts."

Let's see if that theory bears out.

Government