It’s encouraging to read about steps finally being taken by the Obama administration to encourage lending to the nation’s small businesses, as David Cho reports in the Washington Post.  The idea, which Obama has submitted to Congress, is to encourage smaller banks to lend to small businesses by offering these banks lower interest rates for TARP funds.  But as Cho points out, banks often avoid lending to small businesses “because they have historically been a bigger credit risk” than larger firms.

This is why the decision to raise the cap on small-business loans administered by the Small Business Administration makes even more sense.  The ceiling for these loans will increase from $2 million to $5 million, and microloans available to entrepreneurs (where the private lender is still covered by a government guarantee) will increase from $35,000 to $50,000.   Even though many of these businesses may fail, some of them will achieve greatness and employ many people.  That possibility (perhaps as much as the dream of home ownership) is at the heart of the American dream. -NH

Matthew Blake is on vacation.

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