Bad mortgages, foreclosures, bank collapse, stifled lending. The domino effect that created the nation's housing and credit crises has left more than just homeowners in the lurch. Small-business owners too have been victims of restricted lending, to the point where, according to the U.S. Treasury Department, even businesses with strong credit histories have seen loan applications denied due to conditions outside their industries and beyond their control. As a result, many companies are struggling to expand their businesses, make payments, or even keep workers on payroll.

Thankfully, the Obama administration says it recognizes that America's small businesses have generated about 70% of new jobs annually over the past decade. As such, new steps are being taken to "ensure that credit — the lifeblood of America's small businesses and its economy — gets flowing again to entrepreneurs and business owners," the Treasury reported on Monday.

Treasury Secretary Timothy Geithner announced that, in addition to increased loan guarantees and reduced fees for certain Small Business Administration (SBA) loans, the Treasury Department will, by the end of March, begin purchasing securities backed by SBA loans to help get the credit market moving again. In combination, these steps are designed to give lenders more confidence in extending credit to small-business owners.

In past years, the SBA has typically guaranteed $20 billion in loans annually. However, current lending shows that number to be below $10 billion this year. To relax banks' lending attitudes and boost these numbers, the Treasury stands ready to purchase up to $15 billion in securities and increase loan guarantees from 85% for loans of $150,000 or less, or 75% for larger loans, to 90% for each eligible loan. "This temporarily available increase in guarantees will help provide banks with the greater confidence they need to extend credit during the recession," the Department said in a press release. Many loan fees also have been temporarily eliminated to reduce the cost of capital.

Last month, the SBA also announced that President Obama’s budget for fiscal year 2010 includes an SBA appropriation of approximately $700 million. The spending cited in the broad proposal would be in addition to the $730 million in funding provided for SBA credit programs enacted through the Recovery Act, with spending targeted for 2009 and 2010.

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