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A Shift in Mandate: Federal Bailout Funds for Small Businesses

Mark Marich

It seems like some policymakers have decided to invest directly in the most powerful job creators, small businesses. The Washington Post unveiled this morning that there are a few plans under discussion in Washington to boost job creation and the recovery by making bailout funds available to small businesses through community banks. Here are some of the approaches lawmakers and other government officials are considering:

•    Sen. Mark Warner (D-Va.) proposed on Wednesday combining resources from the Treasury Department, Federal Reserve and private banks to create a $50 billion pool of money that would be used for loans to small businesses.
•    The Treasury is developing its own plan to use around $10 billion of bailout funds. This approach would not involve the Fed.
•    The Treasury is also developing other initiatives to widen SBA lending programs and extend aid provided to the agency through the economic stimulus package. According to the Post, the Treasury is also negotiating with Coastal Securities, a small-business financier, to buy a $100 million package of SBA loans under a long-delayed program designed to free up credit.
•    At yesterday’s “Increasing Access to Capital for Small Businesses” hearing, House Small Business Committee discussed proposals to increase the maximum amount that companies can borrow through SBA programs to $3 million from $2 million, as well as to waive for another year the fees borrowers pay for such loans.

These efforts could potentially ease some entrepreneurs’ discontent with the government’s approach to recovery. A recent Kauffman survey of American entrepreneurs revealed that 53 percent of entrepreneurs believe that the stimulus package has hurt entrepreneurial activity.” 

Read the full Washington Post report, Effort Underway to Speed Aid to Small Businesses, for further insights from sources.

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