Obama To Increase Credit To Small Businesses

Officials in Washington are looking for ways to improve the climate for small businesses. President Obama on Wednesday will announce a set of initiatives aimed at providing more credit to small businesses, and help small banks get access to bailout funds.

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A family-owned paper warehouse in Maryland will get a visit from the president today. While Mr. Obama is there he'll outline plans aimed at making it easier for small businesses to borrow money. Although the financial system is more stable today than a year ago, some small firms complain they're still locked out of the credit market. And that could be hampering the nation's economic recovery. NPR's Scott Horsley reports.

SCOTT HORSLEY: When Cathy Lanier heard the president is trying to jumpstart small business lending her first action was: it's about time. Lanier employs about 35 people at her software development company in South Carolina. She's been in business since 1989.

Ms. CATHY LANIER (Small business owner): If we can keep our doors open until January we'll make our 20 years.

HORSLEY: Lanier is far from certain she'll reach that milestone. Although she has a couple of big contracts lined up for next year, she may not be able to make payroll next month. For now, no one wants to lend her the money she needs to stay in business.

Ms. LANIER: We've reached out everywhere we can reach out. I'm shaking every tree and every bush, and just do not seem to be able to find the working capital we need to stay open and fund the startup of these two new contracts. Not only will we go under, but it means our state will sacrifice anywhere from 50 to 200 new jobs that we'd be creating next year, if we could just stay open long enough to work these contracts.

HORSLEY: The Obama administration has been looking for ways to boost small business lending. Gene Sperling, who's a counselor to the Treasury secretary, told a Senate committee yesterday: keeping small businesses viable is crucial for the nation's economic turn around.

Mr. GENE SPERLING (Counselor, Treasury secretary): I don't have to tell any of you how important small business is. And we remember that small business job growth was where we saw the first signs of the job growth that led us out of the last recession or led it out of being a jobless recovery.

HORSLEY: Today, the president will propose a variety of steps to make credit more widely available to small business, including bigger loans backed by the Small Business Administration and a plan to make it easier for small banks to tap the $700 billion bailout fund.

Virginia Senator Mark Warner has also proposed using bailout money to bankroll a small business lending effort. In a letter to the president Warner suggested putting $40 billion from the fund into a small business loan pool with participating banks contributing another $5 billion to $10 billion.

Senator MARK WARNER (Democrat, Virginia): The banks would take that first dollar loss of risk and so the banks will have skin in the game, and they can then use their own networks with the small businesses and, combined with the TARP funds we could see $50 billion put into small business lending over the next 12 to 18 months, which would be a real shot in the arm.

HORSLEY: Thirty other Democrat senators signed on to Warner's letter. With national unemployment nearing 10 percent, the Obama administration is under pressure to show government rescue efforts working close to home.

Senator WARNER: You know, it's great news that the Dow broke 10,000, but if you can't get a job that's not very relevant news. And there seems to have been, clearly, recovery on Wall Street. We're seeing, in certain cases, record bonuses being paid. But a lot of this has not translated down to main street American.

HORSLEY: For many struggling small businesses, though, the problem is not so much a lack of credit as a lack of customers. Bill Dunkelberg, of the National Federation of Independent Businesses, says his members' number one concern is sluggish sales. The Federation's survey, last month, found expansion plans at a 35 year low. In that environment, few small business owners want to go deeper into debt.

Mr. BILL DUNKELBERG (National Federation of Independent Business): A lot of potential borrowers are just on the sidelines. They don't need to borrow, and they're going to wait until the economy makes a clear turn.

HORSLEY: Cathy Lanier worries it may already be too late to save her software business. She warns, unless policymakers and bankers do more to help main street companies, there may not be a main street much longer.

Scott Horsley, NPR News, Washington.

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