Government to pump "a significant amount" of money into small business lending

CNN Money reports that the new administration will be concentrating on making lending to small business more attractive.

There was a 57% drop in the number of loans through the Small Business Administration's main lending program for the last three months of 2008, compared to the same period one year ago.

"The stimulus bill passed last month included $730 million for direct spending on small-business initiatives, including expanded financial support for the SBA's two key lending initiatives, the 7(a) and 504 programs. Under those programs, the SBA guarantees loans made by banks to small-business borrowers. If the business defaults, the SBA picks up the tab for the insured portion of the loan. (...)

Currently, the government guarantees up to 85% of loans below $150,000, and up to 75% of larger loans. The stimulus bill allows the SBA to temporarily increase its guarantee to 90%. It also allows the SBA to waive or reduce the fees it changes banks and borrowers for participation in the program."

Additionally, there has been a mention of a new emergency "business stabilization loans" program. It will authorize the SBA to fully back bank loans of up to $35,000 to help businesses pay down existing business loans.

The SBA has been slow to release details and guidelines, citing the complexity of the tasks as the reason for the delays.