US plans bailout of small businesses to prop growth, employment

The Obama administration is planning to divert a part of the $700 billion bailout funds to rescue the ailing small businesses, reported The Washington Post today.

"Small business is the backbone of American jobs and innovation," said Matthew Vogel, a White House spokesman. "We are deeply committed to continuing to work every single day to devise and implement policies that will help small businesses through these challenging economic times."

According to some unofficial trade reports, small businesses employ 60 to 80 per cent of all workers in the US.

Quoting sources familiar with the plan, the report said the effort would represent a striking shift from the rescue programme's original mandate of helping big banks rescued from the bad debt,

A proposal being floated by senior treasury department officials calls for using the bailout funds to expand a government programme that helps small companies borrow from banks at low rates to keep their businesses going, the sources said.

These "working-capital" loans would come with few restrictions and could be used to buy inventory, hold on to employees and pay off short-term debt.