Obama’s Small Business Lending Initiative

The Obama administration has come up with a new initiative to help small businesses. Details of this plan can be found here. The goal of this initiative is to increase access to capital through tax breaks on small businesses investments and lending incentives to smaller community banks which should lead to job creation. Here is a break down of the initiative.

To increase small businesses access to loans a $30 billion “Small Business Lending Fund” (SBLF) will be created. Access to this fund will be limited to banks with less then $1 billion in assets as to target smaller community banks that are a staple of small businesses lending. The funds will given to banks with a sliding scale interest rate that gets lower as small business lending is increased compared to previous years. For example, if a bank were to increase their small business lending 10% or more compared to 2009 numbers, the rate they would pay for the SBLF funds would be 1%; if small business lending stayed the level the rate would be 9%.

The initiative also provides incentive for states to continue and build upon their successful and innovative small business programs. It would allow states to use federal funds for these programs that might otherwise be on the copping block because of states budgets.

This initiative also has a few tax incentives that may help keep some businesses afloat as well as spur investment in small business. The first of which is eliminating capital gains taxes on small business investments. As well changes to the tax code that allow small businesses to immediately write off qualified capital investments. Further a provision will accelerate the rate at which depreciation on plants and equipment can be deducted.

The last provision in the initiative is the enhancement of SBA programs which should provide increased access to capital. To accomplish this, the maximum size of various types of SBA loans will be increased; more than doubled for most types of loans. This applies specifically to the 7(a), 504, and SBA express loans. Within this provision there is a section addressing the need to assist in the refinancing of commercial real estate that might otherwise be in danger of foreclosure or liquidation. This is available only to “owner occupied commercial real estate,” in other words, small businesses owner that own the space they run their business out in.

Keep an eye out to see if this initiative gets passed. It has the potential to provide much needed help for small businesses. We will keep you updated.