Small Business and Community Bank Lending Initiative

February 10th, 2009

Today Treasury Secretary Timothy Geithner announced a new government plan to get credit flowing again, and it includes a special initiative to help small business called the Small Business and Community Bank Lending Initiative. The government also has a brand new web site under construction that lays out the six parts of a larger Financial Stability Plan:

1. Financial Stability Trust
2. Public-Private Investment Fund ($500 Billion - $1 Trillion)
3. Consumer and Business Lending Initiative (Up to $1 trillion)
4. Transparency and Accountability Agenda – Including Dividend Limitation
5. Affordable Housing Support and Foreclosure Prevention Plan
6. A Small Business and Community Lending Initiative

According to the website, President Obama, the Treasury Department, and the SBA will announce the launch of a Small Business and Community Lending Initiative over the next several days. The goal of the initiative is to stop the decline in SBA lending. SBA 7 (a) loans were down 57% last quarter from the same quarter a year ago. The new effort will include:

1. Using the Consumer & Business Lending Initiative to finance the purchase of AAA-rated SBA loans to unfreeze secondary markets for small business loans.
2. Increasing the Guarantee for SBA Loans to 90%. The Administration is seeking to pass in the American Recovery and Reinvestment Act an increase in the guarantee of SBA loans from as low as 75% to as high as 90%.
3. Reducing Fees for SBA 7(a) and 504 Lending and Providing Funds for Oversight as well as Speedier and Less Burdensome Processing of Loan Applications.