WASHINGTON — The White House is weighing another attempt to help small businesses with bailout funds, but doubts remain about whether lenders will bite.

Just how the Trouble Asset Relief Program might be used to aid small businesses has not been decided, but the issue is expected to be aired this morning at a meeting with the head of the Small Business Administration, lawmakers and industry leaders.

"This is a signal that the White House continues to be concerned about the credit crunch on small businesses," said Christopher Crawford, who was to attend and is the president and chief executive officer of the National Association of Development Companies.

But a previous effort to direct some of Tarp's $700 billion toward small business sputtered.

In mid-March the administration unveiled a $15 billion plan to buy securities backed by SBA loans in an attempt to jump-start the secondary market for small-business loans.

Yet broker-dealers, who held the securities, balked. Many said they feared they would have to meet the same tough conditions imposed on financial institutions receiving Tarp capital infusions, including having to issue stock purchase warrants to the government and abiding by restrictions on executive pay.

Observers said SBA lenders may have a similar reaction the second time around.

"The challenge is: How do they get rid of the Tarp restrictions so that lenders will participate?" Crawford said.

It remained unclear Monday whether the administration will try to strengthen traditional SBA programs that provide loan guarantees for private lenders or provide aid directly to SBA lenders.

Using Tarp money to benefit small business could also face legal questions. For example, some benefits for small businesses were provided by the economic stimulus package, such as lower borrower fees and increasing the amount of an SBA loan that is guaranteed. But it is unclear whether the administration could use Tarp to pay for those benefits, since Congress had approved using stimulus funds to pay for them.

Even an SBA spokesman said it was too early to know what the program would look like, and he cast doubts on whether the aid for small business loans would come from the bailout program, which has largely focused on keeping banks and other institutions solvent.

"This is one of many ideas that have been put out for consideration among members of the administration," said Jonathan Swain, the SBA's Assistant Administrator for Communications. "Any discussion of utilizing Tarp money is preliminary and any speculation on the specifics of how that would work is premature."

Those expected to attend the meeting today in addition to Crawford included Karen Mills, the SBA administrator; Senate Small Business Committee Chairman Mary Landrieu, D-La.; Tom Burke, the head of Wells Fargo & Co.'s SBA lending division; and representatives of various financial services trade associations.

"This is more of a continued dialogue," said Tony Wilkinson, the president and chief executive of the National Association of Government Guaranteed Lenders.

Crawford said it made the most sense to direct bailout funds to expand existing programs at the SBA, rather than create a new framework for providing credit to small businesses, since the agency has the best track record.

"This is the reason why the White House has to turn to the SBA," he said. "The SBA has the conduits to get the money on the street."

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.