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President Obama to Outline New Small Business Lending Fund

New program will transfer TARP funds to increase lending to small businesses

WASHINGTON – On Tuesday, February 2, 2010, President Barack Obama will hold a town hall meeting in Nashua, New Hampshire where he will outline the new Small Business Lending Fund. He will be joined by Small Business Administrator Karen Mills.

The Small Business Lending Fund will transfer $30 billion from the Troubled Asset Relief Program to a new program that will support small business lending.  The Small Business Lending Fund will be targeted at community and smaller banks that lend the most to small businesses, and offer incentives for banks to increase small business lending.

In the State of the Union Address, the President outlined a series of proposals to create jobs and grow our nation’s small businesses.  Last week, President Obama outlined a new Small Business Jobs and Wages and Tax Cut to encourage hiring and create incentives for employers to increase wages for already existing employees. 

Key elements of the new Small Business Lending Fund are below:

Limited to Community and Smaller Banks Which Devote a Higher Share of Lending to Small Businesses: The Small Business Lending Fund would support lending among small- and medium-sized banks (with assets under $10 billion). These banks devote the highest percentage of their lending to small businesses in their communities, accounting for over 50 percent of all small business loans nationwide, even though they make up only about 20 percent of all bank assets.             
Program Would Be Separate and Distinct from TARP to Encourage Participation: By transferring, through legislation, $30 billion to a new program that would be distinct from TARP, the Administration’s proposal would encourage broader participation by banks, as they would not face TARP restrictions.
A Core Function of New Fund Would Be Offering Capital With Incentives to Increase Small Business Lending: The Administration’s core proposal for the new lending fund is an initiative to invest in smaller banks capital under terms that provide strong incentives to increase lending. As participating banks increase lending to small firms compared to 2009 levels, the dividend paid to Treasury on that capital investment would be reduced.
Administration Will Discuss with Congress Additional Ideas to Enhance Credit for Small Businesses Through the Small Business Lending Fund. While the Administration is presenting its plan to provide capital with an incentive structure to maximize small business lending, it looks forward to discussing with Congress other ways that – in addition to what is described above – the Small Business Lending Fund could be fully deployed.

A full fact sheet is attached. 

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