The government currently guarantees between 50% and 85% of these loans, and under the new proposal would guarantee up to 90%.
The government will also temporarily lift some of the fees on these loans and begin to buy up to $15 billion worth of bundled small business loans on the secondary market.
These are loans under a program aimed at business owners who were unable to find credit from other sources.
"The government of the United States has put in place extraordinary protections for the banking system, so that banks can continue to benefit from low costs funds, and so that they have access to the liquidity they need. We need you to put that assistance to work for the American economy,'' Treasury Secretary Timothy Geithner told a White House audience made up mostly of small business owners when President Obama announced the program.
The administration said while the Small Business Administration usually guarantees about $20 million in loans per year, because of the credit crisis it is on track to guarantee only about $10 million.
The administration is also requiring that the 21 largest banks that receive federal funds through the Troubled Assets Relief Program report on their small business lending record when submitting monthly reports.
Both CUNA President Dan Mica and NAFCU President Fred Becker and their top regulatory lawyers were at the White House event.
After the event, Mica told Credit Union Times he hoped to use the Obama administration's interest in making more capital available for small businesses as additional leverage to persuade lawmakers to lift the cap on member business loans.
Sen. Charles Schumer (D-N.Y.) has said he plans to introduce legislation to accomplish that later this year.
Mica said he discussed the issue with Valerie Jarrett, the senior adviser to Obama for intergovernmental affairs and public liaison who promised to put him in touch with other administration officials to discuss the matter further.
Becker said raising the percentage of loans guaranteed by the government to up to 90% will help credit unions by expanding the reach of the program.
He also said that on the issue of member business loans, "the more the public becomes aware of this issue, the more pressure there will be for action on Capitol Hill.''
Becker shook hands with Obama and told him that credit unions do a lot for small businesses and said the president replied, "Thanks very much, I appreciate that.''
CUNA Senior Vice President and Deputy General Counsel Mary Mitchell Dunn said she shook Obama's hand and said to him "credit unions want to help small businesses.'' Obama replied, "I agree.''