WASHINGTON — President Obama will announce a series of initiatives on Wednesday aimed at boosting credit to small businesses, an administration official said, as the White House tries to address a complicated issue many believe is dragging on the economy.

The White House will move to increase the caps on existing Small Business Administration loans. It will also include measures to make it easier for small banks to access funds from the Troubled Asset Relief Program.

The Obama administration has struggled to figure out what to do for small businesses and has spent months trying to get their initial program off the ground.

The White House has faced criticism on multiple fronts related to small banks and small business lending. Many community banks have complained the Bush and Obama administration moved swiftly to help direct taxpayer money to large banks but made it harder for community banks to qualify. Small businesses have also complained existing government programs don't do enough to free up credit for their needs.

The Treasury Department is still working out details of the program, including how much it will cost banks to participate in the effort. The administration wants to make it less expensive for banks to access Tarp funds by reducing the 5% dividend that financial institutions must currently pay, according to people familiar with the matter.

The Treasury may also offer banks other to-be-determined incentives to encourage their participation.

Any bank that wants to participate would have to provide the government with a plan showing how they intend to lend to small businesses.

It's unclear whether banks would take advantage of the program. One potential stumbling block is a legal requirement that anyone participating in Tarp sell warrants to the government giving the U.S. the right to purchase common stock at a set price. Congress intended for the government to make a profit on the 10-year warrants, and some banks have complained that the government is charging a premium for buying back the instruments.

Indeed, the warrants have been a sticking point in the administration's previous effort to help small businesses. A long-awaited $15 billion Tarp program to buy SBA-backed loans has struggled to get off the ground over concerns about the warrants, as well as Tarp executive compensation restrictions. The program, which Obama announced last March, has yet to begin purchasing loans.

Political pressure has grown on the White House to put together some sort of program to help aid small banks and small businesses, which the SBA credits with creating between 60% and 80% of new jobs. With unemployment rising and expected to top 10%, the administration is looking for ways to create new jobs, or at least prevent as many layoffs as possible.

Aiding Main Street has only become more important as Wall Street, buoyed by the government, begins to recover and bankers continue collecting large bonuses.

"It's apparent that we need to speed credit access to the economy, and I believe that we need to support the recapitalization of our community banks as one of the best ways to get capital flowing to Main Street and get job growth started in our economy," Sen. Tim Johnson said at a hearing last week.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.