Obama Acts To Loosen Credit For Nation's Small Businesses

President Barack Obama freed billions of dollars to help the nation's small businesses on Monday, hoping to get credit flowing again to Main Street as well as Wall Street and showering praise on the little guys of American industry who have been complaining about being left out of rescue efforts.

The centerpiece of Obama's latest plan will allow the government to spend up to $15 billion to buy the small-business loans that are choking community banks and lenders.

That, in turn, could allow those banks to start lending money again to small companies to invest, pay bills and stay afloat.

"You deserve a chance. America needs you to have that chance," Obama told small-business owners gathered in the White House East Room as the administration detailed various steps to get credit flowing to small businesses.

With Treasury Secretary Timothy Geithner by his side, Obama said the nation has small businesses to thank for about 70 percent of the new jobs in the past decade.

Geithner said that as small businesses prosper, the nation does.

"As president I will continue to do everything in my power to ensure that you have the opportunity to contribute to your community, to our economy and to the future of the United States of America," Obama said.

GET MONEY FLOWING

The White House announced a series of moves to get credit flowing to small businesses. The goal is to help those businesses make payroll, buy equipment and maintain or even expand employment.

Boost bank liquidity: Normally, primary bank lenders can issue loans to small businesses and then sell those loans to what's known as a secondary market of bigger bankers.

The sales allow the community lenders to make even more loans and keep the credit cycle going, but that isn't happening. Skittish investors have been staying away.

The government will start buying up many of the loans directly, with terms to be worked out as soon as this month.

The cost will be up to $15 billion.

Make banks accountable: The 21 largest banks receiving government money must report monthly on how much lending they do to small businesses.

The reporting requirements for financial institutions receiving government bailout money are the first, the White House said.

So far, those banks have reduced the amount of lending they have done with businesses.

The Treasury Department says in a monthly report that lending on regular business loans and on business loans backed by real estate both declined in January when compared with December.

WHAT THE SBA WILL DO

The administration plan includes $730 million from the stimulus package to immediately reduce small-business lending fees and to increase the government guarantee on some Small Business Administration loans to 90 percent.

Raise guarantee: Although the SBA typically guarantees $20 billion in loans annually, new lending this year is on track to fall below $10 billion if nothing is done, according to the administration.

Raising the percentage of a loan the SBA guarantees increases the amount individual small businesses can borrow.

WHAT THE IRS WILL DO

Geithner ordered the Internal Revenue Service to issue a series of new rules for temporary but significant tax breaks, meaning small businesses:

•That earn up to $15 million will be allowed to claim losses for the past five years in the current tax year;

•May write off up to $250,000 in investments this year.

•Can reduce estimated tax payments to 90 percent of the previous year's filing.

•Are allowed to take larger depreciation deductions within the first year of property purchases.

•Will see 75 percent of capital gains excluded for those who invest in small businesses.

GET MONEY FLOWING

WHAT THE SBA WILL DO

WHAT THE IRS WILL DO