Small-Business Loans

Advocates for boosting small-business lending have found lots of support in Washington, from Congress to President Barack Obama. But after a year of jawboning, progress has been hard to come by.

That could change if a proposal backed by U.S. Rep. Gary Peters, a Bloomfield Township Democrat, to generate $50 billion in credit for small businesses becomes part of an expected jobs bill congressional Democrats are likely to launch soon.

In a town hall meeting Friday in Elyria, Ohio, Obama said he was pressing his administration to explore ways to get banks lending again, saying they "are still not lending to small businesses enough" due in part to concerns from regulators.

"There should be a discussion about whether or not we've seen the pendulum swing too far," Obama said. "Used to be they would lend anybody anything; then they lost all this money, and now they won't lend people with good credit anything. That's not good for the economy."

Small businesses, the majority of which have five employees or fewer, account for about half of the jobs in Michigan's economy. Before the downturn, the 26 million such businesses nationwide drew $718 billion in loans a year -- everything from property mortgages to credit cards.

Banks cut small-business lending

The recession clearly has drained some of the credit available for small firms. According to U.S. Treasury data, the 22 largest banks that have taken federal aid under the financial industry bailout have shrunk their small-business lending by $12.5 billion since April, with $1 billion cut in November alone.

The National Federation of Independent Business, the largest lobbying group of small businesses, said in its December survey of members that 15% saw credit standards tightening.

Yet many experts say the problem stems from a lack of demand among small businesses, which don't need to expand in the throes of a recession. Only 8% of the firms in the same poll reported any problem with getting the financing they needed, and just 4% cited financing and credit as their top business challenge.