On Monday, I blogged about reports that the Obama administration was trying to develop a financial plan to help small businesses with either money from TARP or changes to the Small Business Administration (SBA) loan programs. From reports yesterday, it sounds like they are using both approaches to get money out to help small businesses as soon as possible.
Banks with less than $1 billion in assets are now eligible to apply for TARP funds at the reduced rate of 3%. Since about 89% of the banks in the U.S. have less than $1 billion in assets, that covers the community banks that make most of the loans to small businesses in our cities and towns. Banks have to file an application and approval from their regulatory authorities. After that happens, it will take about 90 days to receive the infusion of capital from TARP.
As a second approach, the administration has asked Congress to take a look at the SBA's loan programs and increase 7(a) loan guarantees along with the amount of SBA 504 loans for capital projects. The President even targeted microloans, asking for an increase from $35,000 to $50,000.
Despite previous efforts by the administration to increase SBA lending to small businesses over the past few months, SBA loans dropped by 36% in fiscal year 2009 under the administration of Karen Mills.
Will this effort by the Obama administration be enough to provide community banks with an incentive to loan to small businesses? What do you think?
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