The Treasury Department announced a new credit plan on Tuesday intended to spur $20 billion in small business lending, especially to minority-owned businesses.
The new program is modeled after state initiatives known as capital access programs (CAP), in which borrowers, lenders and local economic development entities contribute a certain percentage to an investment fund that is used as collateral to support loans issued to borrowers, according to the Dow Jones Newswire.
CAPs have a strong record of lending to minority and women-owned business that may have had trouble getting credit or faced discriminatory lending practices.
Some critics worry that the new program might have some of the same problems that plagued the TARP plan. TARP funneled money to large and mid-size banks in order to boost small-business lending but it remains to be seen if that’s actually happened, said Dow Jones.
The Federal Reserve and FDIC have made a priority of bringing local business leaders and community banks together, an effort praised by the National Minority Business Council President and other groups.
“As a society, we must level the playing field and make capital more available to small enterprises,” Javier Palomarez, president of the U.S. Hispanic Chamber of Commerce.
This article was submitted by Rohit Arora, co-founder of Biz2Credit. Biz2Credit is a small business marketplace that connects entrepreneurs with financing options and advice to grow their business. Send all questions to