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New Programs to Support Small Business Lending

Mark Marich

The Obama Administration seems to be warming up to an important fact: entrepreneurs will be the real drivers of new job creation and economic recovery. 

The latest evidence comes from last Monday’s White House announcement of a series of measures to help address the credit crunch facing many small firms. The White House and Small Business Administration (SBA) hope to address these problems with three new policy directions:

  • Raising guarantees on SBA’s 7(a) loans up to the limit of 90 percent. This move should encourage banks to lend and also allow them to lend more funds.
  • Eliminating fees on other SBA loan programs, such at the 504 program (for both borrowers and lenders) and the 7(a) program (for borrowers).
  • Directing the Treasury Department to commit $15 billion to purchase small business securities currently frozen on the secondary market.

All of these steps should help small businesses that are eligible for SBA programs, but will likely have little impact on the many firms seeking equity capital or other forms of investment.

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