Among the strategies to improve access to credit for small businesses, the Obama administration said it will support lending by providing lower-cost capital to small banks that present small business lending plans and to community development financial institutions that lend to small businesses in the hardest hit rural and urban areas. CDFI credit unions would be eligible to apply. Under the Capital Purchase Program, which allowed banks to apply for capital at a dividend rate of 5% for the first five years and stepping up to 9% after five years, credit unions were not eligible. The proposal would now allow them to apply for subordinated debt at rates equivalent to those offered to CDFI banks and thrifts.
The administration also plans to increase the maximum loan size of the SBA's 7(a) loans from $2 million to $5 million, increase 504 loans to $5.5 million and increase the agency's microloans from $35,000 to $50,000.
According to the White House, the president will call on Treasury Secretary Timothy Geithner and SBA Administrator Karen Mills to convene a conference of regulators, congressional leaders and small business owners to establish further steps the government can take to help small businesses access credit.
The American Recovery & Reinvestment Act temporarily raised the guarantee on SBA 7(a) loans and eliminated upfront borrowing fees on 7(a) and 504 loans. As a result, the average weekly SBA loan volume is up over 70% and SBA secondary markets have returned closer to historical levels. In total SBA funding has supported nearly $13 billion of lending since the Recovery Act was enacted on Feb. 17.
Under the Financial Stability Plan, the administration has introduced efforts to unfreeze the secondary markets that have traditionally supported nearly half of all SBA lending. Treasury has also introduced new rules to require the largest recipients of TARP funds to report their small business lending monthly and, for the first time, require all banks to report small business lending every quarter. The Recovery Act cut taxes for small businesses, including allowing them to immediately deduct up to $250,000 of investment, carry back losses for five years, and exclude 75% of capital gains from small business investment from taxes.