HispanicBusiness

The Obama Administration on Monday detailed its latest strategy to boost small businesses by greasing the jammed gears of the lending industry.

The idea is to instill lenders with the confidence they need to give out more loans to cash-starved small businesses by providing a government-sponsored backdrop against their risk.

Specifically, by the end of the month, the U.S. Treasury Department will begin making direct purchases of securities backed by federal Small Business Administration loans to ensure that community banks and credit unions feel confident in extending new loans to local businesses.

Also on Monday, in a stern speech, Treasury Secretary Tim Geithner announced new reporting requirements for banks on small business loans.

"We need every bank in the country to do everything in their power to provide the credit that small businesses need to operate, expand and add jobs," he said. "And given the role many banks played in causing this crisis, you bear a special responsibility for helping America get out of it."

Geithner said the government is now requiring the top 21 banks receiving Financial Stability assistance to include small business loans in their monthly reports. Also, Geithner said he will ask regulators for quarterly, as opposed to annual, reporting of small business loans.

This, he said, will help the Treasury Department carefully monitor how much credit is flowing to entrepreneurs and small business owners.

Meanwhile, the plan to thaw the lending market involves several programs.

One, called the 7(a) program, allows businesses to receive loans of up to $2 million that are backed by federal government. This means that lenders are guaranteed a certain percentage of the money back if the business defaults. The new plan -- which is temporary -- calls for boosting the amount of that guarantee, from between 75 and 85 percent (depending on the size of the loan) to up to 90 percent.

Another, called the "504 program," allows businesses to collect up to $4 million in loans for economic development for a fee, CNN reported. The new plan temporarily eliminates any fees on new 504 applications.