House's Next Economic Target: Business Lending

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The House of Representatives this week takes up a plan to encourage more small business lending. Tight credit continues to be a challenge for small businesses and that is a challenge for the Obama administration.

LIANE HANSEN, host:

The recession may have eased but small businesses have been slow to start hiring again. The Obama administration says tight credit is partly to blame. This week, the House is expected to take up a plan to pump $30 billion into community banks.

As NPR's Scott Horsley reports, the hope is that they'll lend that money to small businesses.

SCOTT HORSLEY: Bobby Pancake's small business is getting bigger. He and his partner, Steve Wheat, own a chain of chicken wing restaurants. They recently opened their sixth location and they've hired more than a hundred new workers in the last year. The pair would like to open additional restaurants, but Pancake says getting a bank loan is not easy.

Mr. BOBBY PANCAKE (Co-Owner, Buffalo Wild Wings): We're still in a position where banks are nervous. We're restaurant and they're nervous lending us money because of the economy, because of the way things are, regardless of how our units are doing today. It's an uncomfortable environment out there.

HORSLEY: Last week, Pancake and Wheat met with President Obama to discuss the challenges hobbling small businesses. Afterwards, the president complained overly tight credit is making it hard for these small firms to buy inventory, invest in equipment and, most importantly, hire new workers.

He urged Congress to act on a plan he first put forward in his State of the Union Address back in January. It would invest $30 billion, left over from the bank bailout, in small community banks with incentives for those banks to use the money to increase their small business lending.

President BARACK OBAMA: We've been hearing from small businesses that want to retain and hire more employees but they need additional credit. And we've been hearing from small community banks that want to lend more to small businesses, but they need additional capital. So this bill helps fulfill both needs.

HORSLEY: A House committee okayed the plan last month, although Republicans complained it would unnecessarily increase government involvement in the private sector. President Obama said he hopes the full House will give its blessing this coming week, and that the Senate will follow as soon as possible.

Scott Horsley, NPR News, the White House.

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