Obama Promises More Help for Small Businesses
Oct 21st, 2009 @ 11:50 AM by Amber Nelson
President Obama is not happy with the nation’s banks. They have been too stingy in lending money to small businesses in the past year, he says. The Federal Reserve backs up his statements, reporting that total loans from banks are down $476 billion since December 2008 and commercial and industrial loans are down $204 billion. Now Obama has a new plan to jump start more lending.
Why more help is needed:
President Obama in a statement Wednesday – “Small businesses have always formed the backbone of the American economy. The problem is, our small businesses have been some of the hardest hit by this recession. There’s no question that the steps we’ve taken have improved the overall climate for small businesses across the country, but there is more we need to do.”
Treasury Secretary Timothy Geithner in a statement – “America will not recover until our small businesses recover. In communities across the country, they are the engines of job growth and lead the way to the industries of the future.”
President Obama speaking at the Metropolitan Archives in Landover, MD Tuesday – “There is still too little credit flowing to our small businesses. There are still too many entrepreneurs who can’t get the loan they need to open their doors and start hiring.”
President Obama plans to ask Congress to make some changes to the rules for Small Business Administration (SBA) loans. First he wants to allow lenders with less than $1 billion on their balance sheets to be able to borrow funds from the Troubled Asset Relief Program, or TARP, at a rate of 3 percent, a reduction from the current 5 percent. These banks would have to provide a plan for how they would use the money to boost small business lending and then demonstrate proof of putting that plan into action.
The plan also calls for increases to the loan limits on several SBA loans. Obama is seeking to raise the maximum loan amount on SBA 7(a) loans to $5 million from $2 million. These loans allow businesses to buy equipment and machinery. The limit on 504 loans, which help businesses buy real estate, would be raised to $5.5 million, and micro loans to aid start-up companies would be raised to $50,000 from $35,000.
The House is currently considering these types of lending changes in a new piece of legislation.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.