President Obama recently criticized large banks for failing to lend stimulus money to the taxpayers who kept America’s banks from completely sinking. Ironically, small businesses, and in particular entrepreneurs, have found that the very banks they supported are now closing their doors on them.
The money small businesses so desperately need to continue their operations, pay their employees and help grow the economy has been less and less available, and President Obama says he not happy at all about this turn of events. He went to say that he will take every step to encourage banks to meet their responsibilities and begin lending to small businesses once again.
Small Businesses Caught in the Fray
The President’s argument against the nation’s banks was further backed by three specific proposals that are designed to help small businesses get their hands on loan money. This is part of the President’s small business rescue plan that was introduced more than a year ago.
While his intentions may be good, the question is: can he really get these proposals passed? And if he does, will they even help?
Many of the nation’s banks were part of the Trouble Asset Relief Program, also known as TARP. Much of the funds, however, were not doled out for small businesses, thereby putting small businesses in quite a predicament when it came to lending.
New Small Business Initiatives for TARP
The new initiatives, however, are designed to change the way TARP has been used. Some of the highlights of these initiatives include:
-
Giving community banks with less than $1 billion in assets lower interest rates than typically offered: three percent instead of five percent. However, the community banks would be required to submit a lending plan that will show their plans for small business lending.
-
The limit on SBA-guaranteed loans will increase from $2 million to $5 million, and SBA’s micro-loan program will increase its limit from $35,000 to $50,000.
The National Small Business Administration, of course, spoke out to urge these reforms to pass quickly so that banks can continue with their small business lending.
Now the questions remain, once again, if these new reforms will make a difference when it comes to small business lending. We’ll be watching the legislation closely.
