New White House plan aims to help small businesses access credit

October 21, 2009 — The White House announced a new plan to help banks provide more credit to small businesses. The measures are part of the Obama Administration’s effort to help small businesses recover from the recession. The Obama Administration says the measure will make it easier for small businesses to access credit and create jobs.

The White House hasn’t released full details of the plan, which could take several weeks or months to implement. The National Restaurant Association is analyzing the plan and working with the Obama Administration and the international Franchise Association to ensure the plan will help small businesses/restaurants.

Previous measures over the past nine months haven’t significantly increased small businesses’ access to capital.

The National Restaurant Association believes expanding access to capital will help restaurant operators meet their day-to-day payroll needs and preserve thousands of jobs. Restaurants typically have problems borrowing through traditional means. They often lack the collateral other small businesses might have and appear as greater risks.

The plan announced Oct. 21 calls for lower-cost capital for community banks and increased limits for certain Small Business Administration-backed loans.

The White House also plans to convene a conference of regulators, lenders, Congress and small businesses to discuss more ways to help small businesses access credit. The Association would ensure the meeting includes restaurant industry representatives who can explain the industry’s unique lending needs and risks.

More than 98 percent of restaurant companies fall under the SBA’s definition of a small business.

At this stage, the plan doesn’t completely meet restaurants’ needs:

The program addresses the cost of lending for community banks (those with fewer than $1 million in assets). But it doesn’t cover the qualifications small businesses need to get loans.

Although the community banks would receive the money for the small business loans at 3 percent instead of 5 percent, lending standards have tightened. That means that restaurants might not qualify for the loans or that banks would remain reluctant to lend to them.

A plan to increase the SBA (7(a) and 504 loans to $5 million from $2 million requires legislative action. The House of Representatives Small Business Committee is debating a bill that would increase the loan limits: H.R. 3854, the Small Business Financing and Investment Act.

The Association is sending a letter supporting H.R. 3854 to the committee. The Association has long supported increasing the 7(a) loans to $5 million. Restaurants are more likely to use 7 (a) loans more than other SBA-backed loans.

Print this article

« Go back to the news list