Small business loans get $30 billion boost from U.S. Treasury

There’s good news ahead for those trying to obtain small business loans to either get their business going, or to expand existing businesses. The Obama administration, in an attempt to stimulate the economy, has earmarked $30 billion specifically for bank loans to small businesses. With this move, it is hoped that more “Mom and Pop stores” will take advantage of the financial boon and get the sluggish economy moving by applying for these loans.

The main issue here is to get banks to move into the unpopular area of retail lending to small businesses. This is known to be a slow sector and is not favored by most banks. One of the prime causes, according to the banks, is that the regulations are extremely tough, especially when it comes to commercial real estate, for which banks usually provide financing. This alone is enough to make banks hesitant to get into handling small business loans as part of their portfolio of offerings to business clientele.

The U.S. government, foreseeing this, has made efforts to alleviate their concerns. The funding to banks for this category comes with a very low interest rate of 1 percent, and is expected to entice those banks which are already strapped into some tough deals with the government. Hopefully, the “minimal strings attached” to the $30 billion worth of funds will allow more banks to make it worth their while to support business owners through small business loans.

Image By: Shashi Bellamkonda via Flickr

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