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Obama Pushes Small Business Lending Bill

Posted by: John Tozzi on May 25, 2010

President Obama asked Congress today to pass a package of small business initiatives, including a plan to bolster small banks’ lending with $30 billion.

The package also includes $2 billion to support programs at the state level that support private lending, like one in Michigan I wrote about in December. That program helps manufacturers that can’t get loans because the value of their collateral — property, plant, and equipment — has dropped, through no fault of their own. A state fund puts up cash as as collateral to make banks comfortable lending.

That program funded with an initial $13 million from the state, ran through its initial money in four months. A second pool of $13 million will be committed this summer, according to Ned Staebler, vice president of capital access and business acceleration, Michigan Economic Development Corp. The fund still has more than 50 companies in its pipeline seeking $150 million in loans, mostly manufacturers in the auto supply chain that are trying to diversify into sectors like aerospace, alternative energy, or defense. Staebler says a whole class of businesses that need larger loans of several million dollars or more could benefit from the program if the federal funding comes through.

The Obama proposal requires state programs to use public money to support private lending. “These had to be initiatives that went through a financial institution that had skin in the game and where their overall plan was going to leverage $10 of private money for every $1 of government funding,” said Gene Sperling, counselor to Treasury Secretary Timothy Geithner, in a conference call with reporters May 25. Funding the state lending programs at $2 billion would result in $20 billion in lending, Sperling said.

Obama’s initiative would also invest up to $30 billion in community banks. The banks would benefit from a lower interest rate on that capital — as low as 1 percent — if they increase their small business lending by 10 percent over 2009 levels. More on Obama’s announcement from Bloomberg’s Nicholas Johnston.

Reader Comments

Christopher Choate

June 4, 2010 2:42 PM

Just be thankful for the amendments to the Financial Reform Bill in congress.

Nobody wants to keep seeing big banks get bailed out, but read this article to understand how the proposed bill could have ended business growth and job creation in America. Simply poor policy.

Cathy C.

June 6, 2010 3:07 AM

President Obama' goals of reaching the small people is a very optimistic vision. Catering to the financial needs of small business will not only be beneficial to the business owner but also to the economy for establishing new fields will certainly create an environment for more employment opportunity. It's going to be a give and take process for both business owners and the government.


June 19, 2010 10:38 AM

If, as the result of this federal funding, the small(er) banks increase their lending to small business it will have a greater, longer lasting, and more positive effect than the billions spent on "stimulus" spending.

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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