Sunday, March 15, 2009

Boost to small businesses

New York Times


Details of Geithner's plan to revive the financial system is coming together. Instead of relying on the banks to lend to consumers, the Small Business Administration, a federal agency which has been lending to small business with up to $20 billion annually, will step up its role to stimulate the frozen credit market.

There is nothing like cutting out the middle men to get the job done faster, and more efficiently. For loan guarantees, see the Small Business Administration website.


The broad package of measures to be announced Monday includes $730 million from the stimulus plan that will immediately reduce small-business lending fees and increase the government guarantee on some Small Business Administration loans to 90 percent. The government also will take aggressive steps to boost bank liquidity with more than $10 billion aimed at unfreezing the secondary credit market, according to officials briefed on the plan who demanded anonymity to avoid pre-empting the president's announcement.

Obama will announce the new measures with Treasury Secretary Timothy Geithner at the White House.

The centerpiece of the administration's plan is boosting liquidity by restoring the frozen secondary credit market for SBA loans. Often primary bank lenders will seek to sell the SBA loans in the secondary market, allowing them to use the proceeds of the sale to make new loans to other small business owners, but skittish investors have been staying away.

Under the administration's new initiative, the government will step in to buy these loans to help unlock the frozen credit market, using money from the recently passed bailout package in the range of between $10 billion to $20 billion, one official briefed on the plan said.

The other measures are part of Geithner's financial stability plan that he announced on a broader level last month. They involve temporarily eliminating upfront fees of up to 3.75 percent and some processing charges on certain SBA loans that lenders typically pass along to borrowers. It also increases the government guarantees on certain loans to 90 percent, up from 85 percent for loans below $150,000 and 75 percent for larger loans.

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