LANDOVER, Md. — President Barack Obama unveiled plans Wednesday to refocus spending of the government’s $700 billion financial bailout away from Wall Street’s big financial institutions and toward small businesses on Main Street.
Obama said that he wants to help small businesses grow and is asking Congress to increase the loan amount they can receive from the Small Business Administration.
Obama also says if smaller banks describe how they would increase lending to small businesses, Washington will give those banks capital so they can loan more money. He says he wants to focus on hard-hit rural and underserved areas.
The president spoke at a small business in a Maryland suburb near Washington.
Maine Sen. Olympia Snowe praised the president’s efforts to bolster the availability of credit to small businesses, and was especially pleased that he included her proposals to increase SBA loan limits.
“These are positive steps that can help entrepreneurs improve and strengthen their businesses,” Snowe said in a prepared statement. “These actions will help satisfy the capital needs of small businesses looking to start or expand their operations.”
In a teleconference with the news media that included a reporter from the Bangor Daily News on Wednesday, SBA Administrator Karen Mills and Gene Sperling, counsel to the U.S. secretary of the Treasury, discussed the initiatives.
They explained that the president would ask Congress to raise the limit on how much a small business can borrow from the SBA’s major lending programs to $5 million from $2 million. He also wants to bump up the maximum from $35,000 to $50,000 on the SBA’s micro-loan program.
“These increases are important,” said Mills, “because there are in our analyses, a number of businesses that are bunched up at the top of our size level — at the $2 million level now and we know there is unmet demand for viable, important, growing small businesses in this size range.”
Sperling said the proposal also calls for making Troubled Assets Relief Program, or TARP, funds available to smaller banks, those with assets under $1 billion, as a way to unlock lending for small businesses.
Small firms would be able to borrow from those small banks through TARP at a 3 percent interest rate instead of the 5 percent rate that applied to previous TARP loans.
In addition, community development financial institutions, which focus 60 percent of their lending on low- to moderate-income communities, will have access to TARP funds at a 2 percent rate.
“We understand that we need to actually step up the effort to ensure that we’re getting credit to homeowners and especially to small businesses that will be the engine of job creation that will lead us into a strong recovery,” Sperling said.
Mills, herself a former entrepreneur from Brunswick, said that although there had been a drop in all lending between October and March, the SBA has seen an increase of about 70 percent in most areas since then and has released $13 billion through a total of 33,000 loans nationwide. Those businesses report how many jobs they can save and create and that reported number is in the tens of thousands, Mills said.
“We’re optimistic that we’re going to be able to reach some small businesses that are having trouble getting credit and to bring them into these programs we’ve been able to show have great appeal at this time,” she said.