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How Businesses Benefit from the New Stimulus Legislation

As the President outlines new proposals for spending leftover TARP money, many are pointing to small banking institutions as the key to success. Local banks have a greater interest in seeing nearby businesses succeed, while larger institutions often judge assets by quarterly reports alone.

In the most recent proposals, nearly $30 billion will be distributed to banks with $10 billion or less in assets. There are about 8,000 small community banks that fall under that heading, and all have the potential to receive the stimulus.

Representative Gary Peters noted that "lack of access to credit is one of the largest impediments to creating jobs." He is right, as many small business owners will confirm. To create a job and hire an employee requires capital, the capital to go through the hiring and training processes and the capital to pay the employee until his or her contribution balances out the expenditure.

Expanding a business to make room for a new job takes capital. Relocation requires capital. All of these things and more require startup funds, but they are investments that pay off in the end. Unfortunately, in the wake of economic difficulty, banks are tightening holds on loan money for fear of losing it to a failing business.

Are Things Getting Better? The Small Business Administration (SBA) recently announced expansion of some of its programs. These programs are aimed at increasing credit for small businesses. The SBA has focused on creating loans and grants for struggling businesses to help bring them afloat.

One expansion is in the 504 Program, which secures loans for fixed assets (real estate). Nearly $19 billion is slated for the budget, and it will be available to businesses that need to refinance loans on their locations or structures. In the wake of the real estate boom and crash, this can be an incredible boon to a business trying to meet its rent expenses.

The other expansion is in the SBA's Express programs, which offer guaranteed credit for businesses. The maximum credit amount was nearly tripled to $1 million, which can be used for streamlining, development and increases in manpower, just to name a few uses.

These are just two examples of program expansion that can strengthen small businesses with the credit they need to get running smoothly.

How do I find more? How do I apply? Applications and information can be found on the SBA's website, but to really aid small businesses and communities, the proposed use of TARP funds has focused on small banks. If the SBA website is unhelpful or unclear, business owners are encouraged to visit local banks for more information. With greater federal backing, these local institutions may find it easier to issue loans to the businesses that need them.