The head of the U.S. Small Business Administration said the latest version of a government plan to pry loose lending markets will help small businesses.

Acting SBA Administrator Darryl K. Hairston in a Feb. 10 release praised the Federal Reserve Bank of New York and the latest version of its Term Asset-Backed Securities Loan Facility, or TALF.

“If we want to thaw the credit markets for small businesses, we absolutely have to get the secondary market for small business loans moving again. TALF is a critical element in doing that,” he said. “SBA supports this program and we’re glad the TALF is moving forward with some changes we asked for that will make SBA lending more attractive for 7(a) and 504 program lenders.”

The goal of TALF is to help unfreeze recession-battered credit markets and its revised terms and conditions were announced on March 3 by the Federal Reserve of New York.

The revisions include a reduction in the interest rates and collateral haircuts — a percentage subtracted from the market value of the collateral — for loans secured by asset-backed securities guaranteed by the Small Business Administration or backed by government-guaranteed student loans.

The Reserve said in a release that TALF was “designed to catalyze the securitization markets by providing financing to investors to support their purchases of certain AAA-rated asset-backed securities. These markets have historically been a critical component of lending in our financial system, but they have been virtually shuttered since the worsening of the financial crisis in October. By reopening these markets, the TALF will assist lenders in meeting the borrowing needs of consumers and small businesses, helping to stimulate the broader economy.”

Under the announcement, the Federal Reserve Bank of New York will lend up to $200 billion to eligible owners of certain AAA-rated ABS backed by newly and recently originated auto loans, credit card loans, student loans, and SBA-guaranteed small business loans.

Issuers and investors in the private sector are expected to begin arranging and marketing new securitizations of recently generated loans, and subscriptions for funding in March will be accepted on March 17, the Reserve said.

On March 25, those new securitizations will be funded by the program, creating new lending capacity for additional future loans, it said.

The program will hold monthly fundings through December 2009 or longer if the Federal Reserve Board chooses to extend the facility.

“SBA is optimistic the TALF will help unfreeze the secondary markets and help restore liquidity to the small business lending industry,” Hairston said. “We’re going to keep working closely with the Federal Reserve and the Treasury to make this program successful.”