Obama to unveil plans to help small businesses

WASHINGTON — Amid misgivings over his spending blueprint, President Barack Obama has decided to provide billions of dollars in federal lending aid aimed at struggling small business owners.

The broad package of measures to be announced Monday includes portions of the $730 million from the stimulus plan that will be used to immediately reduce small-business lending fees and increase the government guarantee on some Small Business Administration loans to 90 percent. The government also will take aggressive steps to boost bank liquidity with more than $10 billion aimed at unfreezing the secondary credit market, according to officials briefed on the plan who demanded anonymity to avoid pre-empting the president's announcement.

In the coming weeks, the SBA will unveil additional initiatives as part of the stimulus plan to help a small-business community that is seen as critical to staving off job losses and promoting economic growth, officials said.

"It's a huge step in the right direction," Giovanni Coratolo, director of Small Business Policy at the U.S. Chamber of Commerce, said Saturday. "In this economy, having the least amount of risk for banks will incentivize banks to lend to small businesses. A lot of small businesses will benefit from this."

Obama will announce the new measures with Treasury Secretary Timothy Geithner at the White House.

They come as Republicans have sought to build on some bipartisan misgivings over Obama's ambitious spending blueprint. In particular, Republicans say Obama's budget proposal to raise taxes, starting in 2011, on individuals earning more than $200,000 and on households earning more than $250,000 will hurt small businesses which face higher dividend taxes and limits on itemized deductions.

The administration's proposals to improve worker access to health care and address climate change also could add higher health and energy costs to small businesses. The Obama administration maintains that revenue from auctioning off carbon emission allowances would offset much of the higher energy costs for many Americans.

The new measures taking effect Monday focus on opening up small-business lending. While the SBA typically guarantees $20 billion in loans annually, new lending this year is on track to fall below $10 billion, according to the administration.

The centerpiece of the administration's plan is boosting liquidity by restoring the secondary credit market for SBA loans. Often primary bank lenders will seek to sell the SBA loans in the secondary market, allowing them to use the proceeds of the sale to make new loans to other small business owners, but skittish investors have been staying away.

Under the administration's new initiative, the government will step in to buy these loans to help unlock the frozen credit market, using money from the $700 billion financial bailout package in the range of between $10 billion to $20 billion, one official briefed on the plan said.

The other measures are part of Geithner's financial stability plan that he announced on a broader level last month. They involve temporarily eliminating upfront fees of up to 3.75 percent and some processing charges on certain SBA loans that lenders typically pass along to borrowers. It also increases the government guarantees on certain loans to 90 percent, up from 85 percent for loans below $150,000 and 75 percent for larger loans.

Comments

[OxamsRazor]

Personally, I think that this isn't a bad START. But more is needed. What we have to do is encourage businesses to go after customers and create demand as well.

Great blog on this, and a great alternative stimulus plan can be found here: http://a5media.blogspot.com/2009/03/a5media-stimulus-plan-for-small.html

[Greerdog]

Stimusless package @ $800 Billion and yet less than 5% going to the small businesses that create 70% of the jobs, and via bank controlled SBA LOANS @ many points-over-prime with collateral? Banks a-lot.

[DWX]

The critics don’t know what they are talking about. The President’s plan for economic recovery is to get the credit market flowing again through “small businesses” since 70% of U.S. economy derives from them. The biggest reason why the economy is stumbling is because, as stated by President Obama, that the secondary market for credit is still frozen and the federal government is basically replacing the Wall Street banks as the secondary market.

Obama is probably the only President in the U.S. history that’s actually involved personally in handling every problem that has been created for the last 30 years. I hope he doesn’t burn himself out before his time.

George W. Bush, for eight years, has done nothing but degrade the United States.

[doctordoubt]

Imagine if you will, an up side down pyramid. Now imagine thousands of fat cats standing on the rim, (now the top) and creating trickle down. Now imagine the largest segment of the populations caught in the bottom, the point, struggling to survive. The only real effect will show up at the bottom. That's where the puddle really gets deep. Is it any surprise that the masses would want some kind of relief? Up on the rim, they can't even smell the problem, much less want to pull anyone out. This is the reality of todays America. If the gov is willing to give money to the banks, any loan they make to small business should be forgiven the same way. There are many thousands of mid size companies that can't get loans just to meet payroll. Lines of credit dry up, get canceled, or are refused. Small business has almost no chance to recover under these circumstances.

[FORLOMC]

Thank you Mr. President. The Republicans did everything they could to destroy small businesses and give all the breaks to the largest companies. It is about time we have a President that really cares about Small businesses. You are doing a great job is a very short period of time. Thank you.

[Mnemanth]

"...decided to provide billions of dollars in federal lending aid..."

Once again: Assistance given to the banks. Not to the people who need it.
We, the People, are tired of being picked apart, questioned, regulated, and held accountable while financial institutions are just given funds with no directive to dole it out!
As it's been shown time and again, the banks are taking all this free money- FREE MONEY- and they're sitting on it. People out of work, people going out of business, people losing their homes don't qualify for this "assistance" so the "assistance" isn't assisting anybody but the banks!
For crying out loud: Cut out the middle man, give the money to the Taxpayers who generated the money in the first place. Let the People take control over their lives! The money will be spent, business will be buoyed, bills will be paid, and let the banks and big wigs on Wall Street deal with Trickle Up for a change!

[cdub1991]

This, of course, is the answer to all of those silly enough who try to label Obama a socialist. If he were, the money would be going directly to the people instead of through the filter of the profit driven banking system.

[usedtowander]

Too little, too late.

While they were shoveling money to enrich bankers, I've already laid off 50 because I couldn't get a loan on approved invoice accounts receivable - from those very banks.

None of this will help us.

Besides, this is likely to be just as tainted and ineffective as the money they're shoveling to bankers. All that really happens is that bankers get money.

Incompetent buffoons.

[UncommonSenz]

Yes, he should have simply waived his magic wand and fixed everything on day one!

You do realize there are about a million things on fire right now, right?

"All that really happens is that bankers get money. "

And who else, besides bankers, will lend money?

No matter what he does you'll complain. and if you couldn't get a loan and had to lay off 50, maybe you shouldn't be calling others "incompetent buffoons"...

[Mnemanth]

Don't you get it? People in economic distress don't get loans!! The only entities making anything off of this "assistance" are the banks!

[FORLOMC]

Sounds like your a dittohead who voted for McCain.

[RealPlumber]

I voted for and still heartily support Obama, but the reality of small business owners is not so simple. I am dealing with crushing debt (read interest rates) for trying to survive the downturn and hold on to talented employees. So, I didn't lay off people in hopes of better times (I have seen cycles over the years, and did not want to scrap my company and the lives of my employees ). I have talked to others in my same situation. If we are dumping funds on the Wall Streeters to allow them to keep the "talent", how is this different from the talented plumber who actually performs work, important work to our community. I did not add to the huge unemployment figures you read, will the small business money help us to regain out economic health, or does the fact that I drive a pickup instead of a corporate jet make us less important? I'm not hopeful right now.

[letsbepeaceful]

He's trying to make it easier for people just like you to get those loans by guaranteeing them to the banks, Banks are more likely to loan if they have less chance of the loan defaulting.

[cdub1991]

So you're saying that, now that the money is available, you won't be able to hire back any of those 50 people you just laid off due to the unavailability of the loan?

[edg1]

The money is not available to small businesses. It is going to "free up the secondary markets", in other words, being given to banks, in the forlorn hope that some of it will trickle into small businesses. This approach is consistent with efforts of the past 6 month by both parties: Throw money at the financial industry and hope that after they pay out bonuses and golden parachutes and credit default bets a small portion will actually reach main street and real Americans.

[tonkamatthew]

Nice, we GIVE it to banks, insurance companies that through their BAD policies have lost billions, but only LEND to the small businesses that have been blindsided by these same crimminals we give money to so they can get their promised bonus. SAD, had so much hope for this new president.

[letsbepeaceful]

ummmm....most of what AIG and the banks got WAS loans.

[Denversk]

The money goes to the Banks because SBA cannot directly lend it to small businesses. This was the result of the Reagan days when he dismantled the SBA and made the small businesses go to the banks for money. If there is ever a need to revamp the SBA it is now.

[rblaquinta]

I am so happy this country finally got it right. Mr. President....thank you

[BGDiNLV]

Just because he doesn't move at our speed,doesn't mean he does not get it.Read his website,you saw this coming.Trust ne folks we put the right cat in office.I sleep a whole lot better these days.with President Obama in the White House.He is CLEARLY looking out for US!!!!!!!

[rsprags]

Thank you President Obama for caring for the Small Business and all the people in the US & World. The deficit is a non issue until the government assist can assist in filling the GDP gap in order to create job through gov. spending. Basic economic- supply and demand; OUR CHILDREN WOULD NOT HAVE A FUTURE IF WE DID NOT DO THIS.

[nomoredead]

This will give the gang something to scream about on CNBC tomorrow morning.

[learnsomething]

Good. Thank goodness we have a peoples president in the WH now.

[themodernleader]

"We don't need protectionism" against a mercantelistic system with you and me on the receiving end. Eugenics, you need to understand that "free trade" is not an accurate description that is destroying great civilizations while placing emerging civilizations in control.
Unfettered trade is destroying our civilization. We continue the present trade policies at our peril.

[PhilipTaylor]

Where is the NEW Creative Thinking and Getting around the Corruption of Wall Street and Washington?

Why is this again going through the USURY Charges of the Banksters?

Why not direct Loans from FANNIE/FREDDIE to small businesses at FED Rates and NO FEES?

We need a government BANK OF THE PEOPLE that helps AMERICANS and NOT BANKS!

This is just more Welfare for the Banksters who stole 95% of Americans' Retirement Plans and Trillions in Taxpayer Money!

[AceInTheHole]

I agree , President Obama needs to start weeding the money changers out of the mix. AND SET UP MORE DIRECT LOANS FOR SMALL BUSINESSES. THERE IS NO DIVINE RIGHT FOR BANKERS TO GET A SLICE OF EVERY DOLLAR THAT CHANGES HANDS IN AMERICA. THAT'S A BUNCH OF HUMBUG THAT TAKES UNMERITED PROFITS AWAY FROM THE REAL RISK TAKERS!