NEW YORK (CNNMoney.com) - As small business lending continues to dry up, the federal government is readying two new initiatives aimed at reversing the trend. To unveil them, President Obama traveled Wednesday to Maryland, where he visited a family-owned company that used a government-backed loan to fund a recent expansion.
"There are still too many entrepreneurs who can't get the loan they need to open their doors and start hiring," Obama said from the headquarters of Metropolitan Archives, a Landover, Md., company that stores and delivers paper files. "There are still too many who are struggling to make payroll and stay open. And there are still too many successful small businesses that want to expand further and hire more but just don't have the capital to do it."
The new measures - a collaboration between the Treasury Department and the Small Business Administration - aim to make capital cheaper for community banks and raise the funding limit for loans backed by the SBA.
Under the new plan, banks with less than $1 billion in assets will be able to borrow money from the government at a 3% dividend rate. That's a reduction from the 5% rate the Treasury currently offers borrowers through its Capital Purchase Program, a TARP (Troubled Asset Relief Program) initiative. To qualify, banks will need to submit a small business lending plan illustrating how they'll use the borrowed money to expand their small business lending.