Yesterday President Obama announced that he intends to target a portion of the remaining TARP bailout funds to the needs of Small Businesses.

According to a summary of the president’s proposal posted on www.whitehouse.gov, this new plan would increase the funds available through Small Business Administration microloans from $35,000 per business to $50,000 to business and the funds available through 7(a) loans from $2 million per business to $5 million per business.

7(a) loans are typically used to purchase machinery, equipment, and real estate and can also be used to re-finance existing debts.  In contrast, micro-loans cannot be used to pay off other debts, or for the acquisition of real estate, but can be used to purchase inventory, supplies, equipment, and the like.

SBA loans are available to new and existing business owners, and the Small Business Administration offers online courses for those who want to learn how to navigate the loan application process.

As is currently the case, under the new plan the SBA will not offer these loans directly to the business owner.  Instead it will act as a partial guarantor: encouraging commercial lenders to extend these loans by assuming a portion of the risk.  However, Obama hopes to reduce the cost of these guarantees to lenders who lay out clear plans to increase the number of loans that they offer to small businesses, and in so doing encourage more banks to take part.

Because changes to the Small Business Association’s lending practices require congressional approval, it may be some time before the expanded loan program actually comes into place.  However, it should be noted that the alterations proposed by Obama and his administration echo those put forth in a bill recently introduced to the Senate by Maine Republican Olympia Snowe.

Snowe’s “Next Step for Main Street Credit Availability of Act of 2009″ not only calls for the same loan-by-loan increases as the president, but also increases the funds available to the SBA loan programs as a whole, and includes a clause that would require lenders and the SBA to process online loan applications.

You can track Olympia Snowe’s bill (or any others currently before the Congress) at www.opencongress.org