Editor's note: Earlier versions of this story incorrectly said the bill would increase the share of loans insured by the agency. The portion remains 75 percent.
WASHINGTON (Bloomberg) -- The U.S. Congress gave final approval to legislation aimed at boosting lending to small businesses in what is likely to be the Democrats' final jobs bill before the Nov. 2 elections.
The House today passed 237-187 a measure offering tax cuts, loans and revived stimulus provisions to ease the flow of credit and show voters that Democrats are trying to boost the economy. The bill, approved by the Senate last week, goes to President Barack Obama for his signature.
The dealer portion of the legislation seeks to loosen credit by increasing the maximum size of a federally guaranteed loan that can be extended by the U.S. Small Business Administration.
It would enable small auto dealers to receive federally guaranteed loans of as much as $5 million -- up from $2 million. It would affect the SBA's year-old floorplan financing program for dealers, which has struggled to attract lender participation.
“The small-business jobs bill passed today will help provide loans and cut taxes for millions of small-business owners without adding a dime to our nation's deficit,” Obama said in a statement. “I look forward to signing the bill.”
Economist Alan Blinder, a former Federal Reserve vice chairman, said many small businesses have had “extreme” difficulty getting loans, though he said poor sales remain their biggest problem.
‘Spitting in the wind'
“They always have a hard time getting credit, and given the state of the markets they're having an even harder time now,” Blinder said in an interview. “This ought to be helpful on that score, but if the economy grows at one and a half percent, we're spitting in the wind because there's no demand.”
“The thing that drives small businesses over and above everything else is the ability to sell their product,” he said.
Republicans objected to provisions creating a $30 billion program in which the Treasury Department would buy preferred shares in community banks, with participants paying the government dividends on a scale depending on how much they increase lending. They said the plan amounted to little more than a smaller version of the Troubled Asset Relief Program.
“This is TARP, pure and simple,” said Representative Jeb Hensarling, a Texas Republican. “It is the capital purchase program with a different name.”
Thirteen Democrats voted against the measure. Walter Jones of North Carolina was the only Republican to support it.
For all the controversy over the lending initiative, it's far from certain banks will participate in the program, said Mark Zandi, chief economist for Moody's Analytics. Banks will probably be reluctant to take the government's money, he said, after seeing TARP recipients hit with retroactive executive-compensation limits amid a public outcry over tax dollars going to institutions paying million-dollar salaries.
“I'm skeptical that banks will actually take the government up on their offer,” said Zandi. “The memory of TARP will be in the minds of those lending institutions, and they'll be reluctant to use the capital.”
Drop out
Lawmakers have attempted to allay those concerns by allowing participants to drop out of the program “without impediment” if the government makes changes to the rules that would have a “materially adverse” effect on them.
The bill would also revive stimulus provisions cutting fees and increasing limits on loan guarantees offered by the Small Business Administration. Agency statistics show that volume fell by more than 50 percent after loan guarantees expired and funding to cover fee waivers ran out in May.
The bill keeps the share of loans the agency insures at 75 percent and waives fees that can total more than $56,000 on a $2 million loan.
“That's probably the most potent aspect of the legislation in the near term,” Zandi said.
Other provisions would provide $56 billion in tax cuts over the next 12 months, with the bulk coming through “bonus depreciation” that allows companies to more quickly write off the cost of purchases.
$12 billion
The tax cut would amount to $12 billion over 10 years, the yardstick used by Congress to determine how much bills cost, in part because businesses taking bigger deductions now wouldn't be able to claim them in the future. That would increase projected tax revenue in subsequent years.
The bill would be the fourth major jobs measure to clear Congress this year. Previous legislation offered a payroll tax credit for new hires, aid to state governments to prevent layoffs and extended unemployment benefits.
The administration has called for additional measures, including a permanent extension of a tax credit that subsidizes corporate research and development programs.
Senate Majority Leader Harry Reid has announced separate legislation offering companies a payroll tax credit for each job they create in the U.S. that replaces a worker abroad. Neither is likely to clear Congress before lawmakers adjourn, probably next week, for the midterm election.
Neil Roland contributed to this report
