March 16th, 2009
04:40 AM ET
9 years ago

Obama to announce plan to boost lending to small businesses

President Obama and Geithner will announce a plan to encourage lending to small businesses.

President Obama and Geithner will announce a plan to encourage lending to small businesses.

WASHINGTON (CNN) - President Obama and Treasury Secretary Tim Geithner on Monday will announce administration plans to make lending to small businesses more attractive, two senior administration officials confirm.

Many small businesses, suffering from dried-up coffers and unpaid bills, are having a tough time getting loans from lenders.

"We know that small businesses are the engine of growth in the economy, and we absolutely want to do things to help them," Christina Romer, who heads the Council of Economic Advisers, said on NBC's Meet the Press Sunday.

Romer said the government would pump "a significant amount" of money into boosting small business lending, but she did not reveal a total figure.

The administration's plan deals with two programs handled by the Small Business Administration, the senior administration officials said.

The first one, the "7(a) program", allows small businesses to get loans of up to $2 million backed by the federal government through the SBA. Currently, the government guarantees up to 85 percent of loans below $150,000, and up to 75 percent of larger loans. Under the administration's plan, the government will temporarily increase the loan guarantee to 90 percent as an incentive to banks to lend.

The administration believes this increase will reduce the risk lenders face when they make loans to borrowers who cannot find credit elsewhere, and ultimately give the banks more confidence to sell and make more loans, the officials said.

The second program, the "504 program", guarantees up to $4 million worth of economic development projects for small businesses. Starting Monday, the administration will temporarily eliminate fees for lenders and borrowers on any new 504 applications. The aim is to reduce the costs to both borrowers and lenders participating in the program, the officials said.

The administration will also temporarily eliminate the upfront fees for 7(a) loans that banks charge borrowers. These fees go up to 3.75 percent for larger loans. The administration believes this will decrease the cost of borrowing for small businesses and make it easier for them to get the credit they need to make new investments, the officials said.

Filed under: President Obama • Timothy Geithner
soundoff (110 Responses)
  1. Bubba

    Cheney's already threatening to have his al-Qaeda pals attack us again. The GOP must really be worried that the economy will rebound. Obama's leadership is making a difference!

    March 16, 2009 09:10 am at 9:10 am |
  2. Virginia

    Of course, Prez–spend even more money than we have. My great-grandchildren will love paying for this waste!

    March 16, 2009 09:12 am at 9:12 am |
  3. Chad

    Great! Now I can get a low interest loan to help pay all my new taxes.

    March 16, 2009 09:20 am at 9:20 am |
  4. Anonymous

    Gee, maybe he's smartening up!

    March 16, 2009 09:21 am at 9:21 am |
  5. SniffMe

    "Turbo Tax Timmie" Why so confused???

    March 16, 2009 09:24 am at 9:24 am |
  6. Small Business Owner

    Um, earth/Main St. to Obama:

    SMALL BUSINESSES DON'T NEED LOANS – HELLO!! We actually have to pay our bills with *money we have* or we don't stay in business. I know you don't understand this because you live in Washingtonland.

    WE NEED TAX RELIEF!!! I guess you're suggesting that we will need to take out a loan to pay our taxes. Well, guess what – we'll just go out of business and start getting our welfare checks so that we can start reaping the benefits of all the money you steal from us each month for a change. Way to stimulate the economy – geez, does no one in Washington have a brain or are they trying to devastate the economy?

    March 16, 2009 09:31 am at 9:31 am |
  7. mark from NY

    The money that the government is giving to banks and small businesses is not free. Those banks and businesses will give it back when they get back to their feet. I believe in Obama administration.

    March 16, 2009 09:31 am at 9:31 am |
  8. Rick

    Be Aware...If YOu Can Pay Off Your Debt, DO IT NOW. Obama and his administtration can not and WILL NOT help. They are selling us into DEPRESSION.


    March 16, 2009 09:33 am at 9:33 am |
  9. Sarah in South NJ

    Please quickly enact a "windfall profits tax" on the executives who receive vulgar amounts of bailout money..

    they were responsible for their own meltdown.. they should be PROUD to give back to AMERICA!

    How about 90 percent!

    go research the historic tax rates for individuals and explain WHO enacted the 90 percent tax rate post WWII?

    which stayed as high as 70 percent until Ronald Regan.

    March 16, 2009 09:33 am at 9:33 am |
  10. R Reeves

    The current loan balances need to be lowered to reflect the current value of the property. If you are under water it takes out the incentive to keep your business open. Small business needs help now.

    March 16, 2009 09:35 am at 9:35 am |
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