Obama Small Business Loan Program - An update on the rescue plan - Part 2

In a previous article, mention was made of the new loan initiative Obama administration. Imagine that: someone finally realize that small businesses are the backbone of our economy. It will be the creation of a small loan fund for companies with $ 30 billion just received from major banks under TARP. These funds would be provided to community banks that are seriously interested in making loans to small businesses. It seems that someone finally listening to the suffering endured by our small businesses. Here are more details.

1. Banks with less than 1 billion of assets would be eligible to receive capital investments up to 5% of their expected risk assets. Banks with between 1 and 10 billion in assets would be eligible to receive up to 3% of the expected risk assets. TRANSLATION: "expected risk assets" are loans.

2. The dividend rate, or rate of interest charged to banks for receipt of federal funds, would start at 5%, but with reductions as low as 1% if the bank shows an increase in lending to small firms compared to a Basic set in 2009. The banks would receive a 1% decrease in their dividend rate for every 2.5% increase in loans TRANSLATION: The more you pay the cheaper it is to receive funding.

You do not need a PhD in economics to make money without giving any constraint loans. The flood gates were opened in the fall of 2008 for this purpose, but nothing happened. Banks sat on the federal bailout funds and not flowing. Washington has finally gotten smarter. First, it will only give money to banks that engage in lending, is nothing but banks of smaller communities. Second, hanging a carrot cake, that is, the more you borrow the less interest paid to the government. Using the good old 'style, the desire to make a profit.

Only time will tell if this program is successful. But while we wait for the economy is struggling, there are lenders who are really serious about loan but did not receive bailout monies. They use a program called SBA Community Express, which makes small loans cash flow between $ 5,000 and $ 25,000 at low interest rate of 7.75% guaranteed. At least someone is getting the message .......