PRESIDENT Obama announced in Maryland last Oct 21 his administration’s proposals to help small businesses and unveiled initiatives to give bigger backing to small businessmen to thrive. On the same day, the government’s administrator for Small Business Administration (SBA), Karen Mills, and Counselor to the Secretary of the Treasury, Gene Sperling, held a conference call with regional reporters to discuss Obama’s new lending initiatives that will help small businesses access the credit they need to grow and thrive.
Mills announced that they are proposing to increase the caps for existing SBA loans and give smaller banks better access to TARP funding to encourage more lending to small business.
Obama said that "there’s still too little credit flowing to our small businesses", and announced measures that would allow smaller community banks to borrow at low rates from the Treasury Department’s Troubled Asset Relief Program. Under the administration plan, banks with less than $1 billion in assets could borrow from the program at a lower interest rate than financial institutions are required to pay.
In exchange, banks must demonstrate how they would increase lending to small businesses and follow up with quarterly reports.
According to Mills, most business loans by community banks and other financial institutions that are eligible for the new rules are made to small businesses. Community groups that lend to small businesses in low-income areas under a Treasury Department program will be able to borrow relief money at just 2 percent annually for eight years. The small institutions would be subject to the same compensation rules as any other relief recipient, said Gene Sperling.
During the conference call, it was stated that over the past decade and a half, America’s small businesses have created 65 percent of all new jobs in the country. These companies form the engine of job growth in America. The problem is, small businesses have been some of the hardest hit by this recession. From the middle of 2007 through the end of 2008, small businesses lost 2.4 million jobs. And because banks shrunk from lending in the midst of the financial crisis, it’s been difficult for entrepreneurs to take out the loans they need to start a business.
In his Maryland speech, Obama said his administration’s Recovery Act has given a boost to every American who works at a small business, or owns one, or aspires to own one. "There’s no question that the steps we’ve taken have improved the overall climate for small business across the country. So far, the Recovery Act has supported over 33,000 loans to small businesses that have already helped save or create nearly tens of thousands of jobs – nearly $13 billion in new lending – $13 billion. And more than 1,200 banks and credit unions that had stopped issuing SBA loans when the financial crisis hit are lending again today. And more than $4.3 billion in federal contracts are now going to small businesses," said the President, who also admitted that there’s still too little credit flowing to small business. "So I’m calling on Congress to increase the cap on what’s called 7(a) loans to $5 million. These are the loans most frequently handed out by the Small Business Administration to help folks open their doors and buy machinery, equipment, land and buildings. These larger loans will help more small business owners and franchisees grow. We also need to increase the maximum size of what’s called 504 loans to $5 million. And we should also increase the maximum size of microloans – these are smaller loans – that go to start-ups and other smaller businesses," he added.
President Obama has asked Tim Geithner and Karen Mills to convene a conference in the coming weeks that will bring together regulators, congressional leaders, lenders and small businesses to determine what additional steps can be taken to get credit flowing to small businesses that want to expand and create more jobs.
"Of all the steps we’re taking to move this economy from recession to recovery, I continue to believe that the success of our small businesses will be a foundation upon which our future prosperity is built. This administration is going to stand behind small businesses. You are our highest priority because we are confident that when you are succeeding, America succeeds," stated President Obama. (AJPress)
( Published October 28, 2009 in Asian Journal Los Angeles p. A1 )
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