Watching the government bail out industry giants on Wall Street with
billions of dollars in aid may seem disheartening for small business
owners. But on March 19, 2009, in an effort to support Main Street as
well, President Barack Obama and US Treasury Secretary Timothy Geithner
announced a new initiative to help small businesses stay afloat.

In a meeting with small business owners, Obama called small
businesses “the heart of the American economy” and introduced a plan
that would pump $15 billion of lending money to banks and businesses.
“[Small businesses] are responsible for half of all private sector
jobs—and they created roughly 70% of all new jobs in the past decade,”
the President said.

As early as the end of this month, the Treasury Department will start
making “direct purchases of securities backed by loans guaranteed by
the Small Business Administration,” (New York Times,
March 16, 2009). This is in hopes of jump-starting the secondary
market, where lenders can sell parts of a loan to build capital for
additional loans, a process which the economic crisis has impacted
severely.

Here are the main provisions of this latest governmental aid program aimed at supporting small business:

• The Treasury Department would purchase some of the small business
  loans that currently lock down regional banks and lenders. Banks will
  be able to sell securities to the Treasury Department and the loans
  would be backed by the Small Business Administration.
• According to the Chicago Tribune, the funding for these
  securities is to come from the $240 billion dollars approved by
  Congress as part of the Troubled Asset Purchase Program (Chicago Tribune, March 16, 2009).
• With some of the credit unlocked, regional banks and lenders will be able to start extending new loans to small businesses.
• The 21 largest banks in the US that receive the governmental
  aid will have to report the amount of money they lend to small
  businesses.
• As part of the program to help businesses, the IRS will
  allow small business owners to claim losses not just from 2008, but
  from the past 5 years on their 2008 tax returns. This would mean a
  rebate on taxes paid in previous years.
• Additionally, small businesses will be able to write off up
  to $250,000 worth of “qualified investment” this year, such as
  purchases of new equipment, (White House briefing, March 16, 2009).

US Treasury Secretary Timothy Geithner cautioned lenders.
“Banks need to make the extra effort to make sure that good loans are
getting to creditworthy small businesses in order to serve the larger
public good of moving this nation to recovery,” (Chicago Tribune, March 16, 2009).

Written by B. Kaiser