Under terms of the program, the Small Business Administration will temporarily raise guarantees on the agency's 7 (a) program through the rest of the year, or until funds are exhausted, and temporarily eliminate fees for these loans as well. The 21 largest banks receiving government money must report monthly on how much lending they do to small businesses.
"This is the first step in what is going to be a continuing effort to get credit," Obama told a press conference.
Obama and business leaders are at odds over many issues, including legislation backed by Democrats that would make it easier for workers to join unions.
Nonetheless, Giovanni Coratolo, who oversees the U.S. Chamber of Commerce's lobbying for small- and mid-sized business, considers today's announcement a watershed moment.
"This is a great deal for small businesses," he said in an interview, adding it will be a "huge help for small business as they play an incredibly important role in the economy. Seventy percent of all net new jobs are created by small businesses."
Small businesses -- even those with good credit --- have been locked out of the credit market, making it difficult for them to fund inventory, buy equipment or expand their operations. New SBA lending this year is on track to fall below $10 billion about 50 percent below its typical levels.
"This is a good first step," Coratalto said.