There is an expectation by small businesses that the government is going to create as much as $300 billion credits for them. Bankers are doubting whether there is any need of new loans or whether all the loan amount would be repaid.

A bill was by House in the month of June which is awaiting Senate’s approval. They are concerned that it might be another bank bailout like the Troubled Asset Relief Program.

Benefits of Legislation

• It would create $30 billion of capital to community banks who have small firms as their customers.
• As per the estimations of Small Business Administration, about 64 percent of the new jobs are created by 30 million small firms who have less than 500 employees.
• 5 percent of the initial interest rate would be charged by banks which will decrease by 1 percent if there is increase in small business loans. It may also rise by 7 percent if the loans remain same or decrease.
• As per the bankers, the problem is not scarce credit, but it is lack of demand from credit worthy small firms because of weak economy. It might result in more loans allotted to distressed firms and increase in loss. As more than 240 banks have failed since the starting of the year of 2009. It is majorly because of consumers and businesses fell behind on loans. Many of the community lenders failed.