Obama to Unveil Small Business Help

Finally there's relief coming for small businesses. President Obama will announce on Monday a small business stimulus plan where $10 billion will be spent to buy loans to unlock the frozen secondary market.

"The centerpiece of the administration's plan is boosting liquidity by restoring the frozen secondary credit market for SBA loans. Often primary bank lenders will seek to sell the SBA loans in the secondary market, allowing them to use the proceeds of the sale to make new loans to other small business owners, but skittish investors have been staying away.

Under the administration's new initiative, the government will step in to buy these loans to help unlock the frozen credit market, using money from the recently passed bailout package in the range of between $10 billion to $20 billion, one official briefed on the plan said. The other measures are part of Geithner's financial stability plan that he announced on a broader level last month. They involve temporarily eliminating upfront fees of up to 3.75 percent and some processing charges on certain SBA loans that lenders typically pass along to borrowers. It also increases the government guarantees on certain loans to 90 percent, up from 85 percent for loans below $150,000 and 75 percent for larger loans." - BusinessWeek

To give an idea how low small business funding has sunken, the SBA typically guarantees $20 billion in loans to small businesses. Yet new lending for 2009 without this stimulus plan has been projected to reach below $10 billion.