Obama Administration Launches Small Business Lending Initiatives
Thursday, October 22, 2009
The Obama administration has announced new lending initiatives that the White House says will get credit flowing to small businesses and encourage job growth.
Under the new initiatives the administration said will take steps to improve access to credit for small businesses by supporting lending by small banks and Community Development Financial Institutions (CDFIs) through the Financial Stability Plan.
This new program aims to support small business lending by providing lower-cost capital to small banks that present small business lending plans and to CDFIs that lend to small businesses in the hardest-hit rural and urban areas.
The administration also said it will seek legislation to increase the maximum size of three types of Small Business Administration (SBA) loans.
The proposals will increase the maximum loan size of 7(a) loans from $2 million to $5 million, the maximum loan size of 504 loans up to $5.5 million, and the maximum loan size of SBA microloans from $35,000 to $50,000.
The President says the initiatives will help small businesses invest in machinery, equipment, land and buildings; expand their payrolls by supporting real estate purchases; and will give a boost to start-ups and other smaller businesses.
The President said he will call on Treasury Secretary Tim Geithner and SBA Administrator Karen Mills to convene a conference of regulators, Congressional leaders, and small-business owners to establish further steps the government can take to help small businesses access the credit that is so vital to their growth, and to economic prosperity in this country.
"Small Businesses have always formed the backbone of the American economy," said Obama. "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. And that's why we're announcing [these] new steps to support more lending to America's small businesses-steps that will lead to more jobs, more growth, and a stronger economic recovery."
Commenting on the new initiatives, business groups generally applauded the move, but said the proposals do not go far enough.
Andrej Suskavcevic, CEO of the Commercial Finance Association, said that while he believes any effort to increase the flow of essential capital to small- and medium-sized businesses will aid the economic recovery, "this initiative does not address small- and medium-sized businesses with capital requirements of more than $5 million. This is a crucial - and often overlooked - segment of the economy. It is critical that the Obama Administration take efforts to ensure continued access to capital for non-bank lenders who service the thousands of small and medium-sized American businesses with capital requirements greater than the SBA limits."
"The administration's new initiative includes increased loan caps for SBA lending programs and an infusion of lower-cost capital to community banks, both steps in the right direction," said Todd McCracken, president of the National Small Business Association (NSBA). "Critical to its success, however, is the timeliness in which the measures are implemented, as well as assurances that any capital provided to community banks will be used for small-business lending - not simply shoring up their balance sheets.
Separately today, the Obama administration's "Executive Paymaster" Kenneth Feinberg has ordered cuts in the total pay for the top 25 executives at seven companies receiving the most federal aid. The cuts include executives at General Motors, Chrysler Group, GMAC and Chrysler Financial.
Details of the cuts have not been made public, but an official announcement is expected soon.
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