Obtaining a Small Business Loan Should Become Easier

President Obama and Treasury Secretary Geithner’s March 16th announcement of plans to “Unlock Credit for Small Business” should have a very positive impact on small business lending in the U.S. Specifically, they have temporarily increased the Small Business Administration 7(a) loan program guarantees from 75% to 90% of the loan value, as the lower percentages had not been large enough to give banks the confidence they need to lend. As most small business owners realize the first time they apply for a small business loan, the SBA is not the actual lender, there still needs to be a lending institution that is willing to take them on as a credit risk. This recent action by the Obama administration shifts more of that risk to Uncle Sam, and should have a very favorable impact on how lending institutions view the risk-return of small business loans, increasing the flow of credit to this essential part of the U.S. economy.