President Barack Obama and Department of the Treasury Secretary Timothy Geithner have released the administration's plans to unlock credit for entrepreneurs and small business owners, who have been hit particularly hard by the lack of lending during the financial crisis. According to the president's administration, U.S. Small Business Administration (SBA)-guaranteed loans are trending below $10 billion this year—about $10 billion less than in a typical year.
As part of the Consumer and Business Lending Initiative—just one aspect of the comprehensive package for stabilizing the financial system—the Treasury Department will take several steps to free up SBA-backed lending to jump-start the credit market. The Treasury will start purchasing up to $15 billion in securities backed by SBA loans by the end of March 2009. The administration says this effort will provide some liquidity to community banks, credit unions, and other lenders, encouraging them to extend new loans to local businesses. Combined with higher loan guarantees and reduced borrower and lender fees (set out by the American Recovery and Reinvestment Act), the Treasury's purchases will provide lenders with some assurances against their risks, which should boost their confidence in extending credit. To learn more about the measures of the Consumer and Business Lending Initiative, click here.
After the president's announcement on March 16, The American Institute of Architects (AIA) released a statement supporting the Treasury plan, while also calling for more relief for small businesses. "The White House's plans to help unfreeze the credit market for small businesses announced today is welcome news for the hundreds of small and sole-practitioner design firms that have struggled in recent months to make ends meet," said AIA president Marvin Malecha, FAIA, in the statement. "This is a very helpful step, but Congress and the White House need to take additional steps to provide additional tax relief for small firms, change unfair procurement rules that disadvantage small firms, and ensure that architecture practices of all sizes can take part in the economic recovery."
The Department of Treasury has prepared a "Q&A for Small Businesses" about the new plan (click here).