Peters' Small Business Lending Program Goes Into Effect Today

Press Release

The U.S. Treasury Department will begin implementing a plan authored by Representative Gary Peters to help small businesses grow and create jobs. The program is based on the Small Business Lending Fund Act of 2010 (H.R. 5297) which helps small businesses access capital and provides tax breaks to incentivize business investment. The lack of access to credit has been a major roadblock for the nation's small businesses, many of which are ready to expand and create jobs.

"Small businesses are the key to jumpstarting the economy, but Wall Street banks refuse to give them the loans they need to expand and hire," said Congressman Gary Peters. "This plan puts capital in the hands of our small businesses and entrepreneurs so they can do what they do best, create jobs."

Making it easier to start and grow a small business has been a top priority for Gary Peters.

The plan being implemented today has two components. One allows small lenders to access and disburse capital from a small business lending fund that must eventually be paid back, with interest. $30 billion in government capital will generate up to $300 billion in private sector lending to small businesses.

The second program will allow states to create or strengthen existing innovative small business lending programs. Under the formula in the legislation, Michigan will receive $78 million for its lending programs which must be leveraged at least 10 to 1, resulting in at least $780 million in new lending.

Michigan has been a national leader in developing small business lending programs such as the Michigan Collateral Support Program and the Michigan Supplier Diversification Fund. Projections show that these efforts are already responsible for 14,500 more jobs for Michigan and approximately $140 million in private sector capital made available to small businesses.
Other provisions being implemented allow small businesses to write off the cost of new investments and extend successful loan programs at the Small Business Administration.

Background on Title III -- State Small Business Credit Initiative:
Authored by Rep. Peters

Title III is based on the State Small Business Credit Initiative Act (H.R. 5302), introduced by Reps. Gary Peters, Sander Levin and John Dingell. This section of the bill authorizes two types of state lending programs: Capital Access Programs and "other innovative loan programs." Both types of programs efficiently generate large amounts of private financing for small businesses to innovate and create new jobs.

Capital Access Programs: Capital Access Programs create loan portfolio insurance programs for participating financial institutions which are supported by fees paid by the borrower, the lender and the state. By bolstering the reserve pools that protect lenders from default risk, states are able to help banks and credit unions expand the range of small businesses to which they are willing to lend. These programs have already been successfully implemented in about 30 states.

Other Innovative Loan Programs: States may develop new programs to bolster small business lending. A state must establish that, in total, their programs will support at least ten dollars in private lending for every dollar in federal support. Participating lenders must share in the risk of default with the government.

These efforts are designed to address the critical reasons why the small business lending market is currently frozen: lack of sufficient capital reserves on the part of lenders and collateral shortfalls on the part of borrowers. This title allows flexibility for states to develop strategies to promote lending specific to the needs of small businesses in their region.

Background on Rep. Peters' Record of Putting Small Businesses First:

Since first being elected to represent Oakland County in 2008, making it easier to start and grow a small business in Michigan has been Representative Peters' top priority.

In 2008, Rep. Peters convened a field hearing in Southfield so that Members of Congress could hear directly from Oakland County small businesses and community banks about the lack of available capital for business lending in Michigan. Deputy Secretary of Commerce Dennis Hightower accepted an invitation from Peters in 2009 to visit Oakland County and take part in a roundtable with small businesses. Peters then launched a survey of small business owners' opinions on federal policies to be delivered to congressional leaders and Administration officials. Later, he engaged in a small business tour, going door-to-door to talk with small business owners in cities throughout Oakland County.

Using the feedback he received from small business owners in Oakland County, Rep. Peters developed a number of proposals to help small businesses innovate and create jobs, such as those included in the plan being implemented today. Rep. Peters also wrote and passed a measure to allow small businesses in high unemployment states to access zero-interest loans of up to $75,000, repeatedly supported cutting small business taxes and introduced and passed a bill with Republican Vern Ehlers to reduce costs for small manufacturers participating in the Manufacturing Extension Partnership.

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