Credit Assistance to Small Businesses

It's about time that Washington recognized the importance of small business success to your economy. At last, the Federal Reserve and Treasury announced on November 25 the creation of a lending facility designed to provide liquidity to the small business community as well as to consumers.

The new facility, called the Term Asset-Based Securities Loan Facility (TALF), will lend up to $200 billion on highly-rated securities collateralized by SBA-backed loans, student loans and consumer car loans through December 31, 2009 (unless the program is extended). The Treasury (through its Troubled Assets Relief Program, or TARP) will provide $20 billion of credit protection to the Federal Reserve to support TALF.

This action is essential to provide liquidity to the small business sector. Since mid-September of this year, SBA loans under the 7(a) loan program are down by more than 50%. However, many resourceful small businesses during this period have been successful in finding funding through alternative sources--outside the SBA loan program.

It remains to be seen whether the new program will be effective or whether savvy small businesses will continue to find needed funding in alternative ways.

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