The Treasury Department is planning on asking Congress for legislation to relax rules governing the Troubled Asset Relief Program, or TARP. This new legislation would be used to help small business get loans from smaller banks. The Treasury wants to be able to use about $30 billion to $40 billion of the TARP for small business lending and it may be part of a new jobs package next year.
The Evolution of TARP
Last year Congress approved TARP fund, initially with the purpose of buying toxic assets from banks that were hurt by the financial collapse. It later transformed into a fund that provided direct capital injections into these banks. One year later, most of the TARP has been repaid with interest but the jobs market still looks very bleak.
Help Not Wanted
Many of these smaller banks may not want any assistance for two main reasons. The first is that there may be restrictions that come along with TARP. This can be in the form of compensation restrictions as was seen in the bigger banks’ bailout packages. In addition to that, if they take any aid it may be seen as a bad sign by the general public, and consumers may stay away from that bank. It is a tricky situation for small banks, but hopefully a resolution will come about soon as the economy recovers.
Dallas Small Business Examiner Ivy Carter
$30 billion dollars is expected to come from the White House as the Obama administration is planning to set aside these funds for a lending program for the economic recovery of small businesses. This plan is slated to expire in October 2010 and the Treasury Department has laid out plans on how the $30 billion will be spent which includes lending programs to support small businesses. Unfortunately, the plan itself has yet to be approved by the key members of Congress.
Though the $30 billion boost for small business owners is still in its initial planning phases, small business owners can expect to receive loans, small and large, for maintaining their business. What does the plan mean for small business owners in the North Texas area?
1. More loans from financial lenders. The financial lenders have tightened its lending practices with the downfall of the housing and auto markets. With the expected relief for small businesses lenders will have the financial backing of $6 billion to secure loans to small business owners.
2. Relaxed credit scoring. When the housing market tighten so did the credit scoring. Lenders refused to issue loans to consumers and small business owners but with the new financial boost lenders will have a 4 million loan goal to meet.
3. Ability to remain viable. More capital means more viability for small business owners; therefore the $30 billion will enable small business owners to update their marketing and business plans for future gains.
4. Pay employees. At some point in time small business owners were doubtful in their ability to pay their employees for time worked. Fortunately the new plan will enable small business owners to maintain a strong payroll system.
5. Increase inventory. Small business owners who have been operating with the minimal supplies will soon be able to maintain an inventory level for their clients.
As soon as the Obama administration and Congress reach a consensus on the details of the small business bailout initiative, small business owners will be able to perform the primary functions of their business and survive or revitalize their operation.
