IBTimes.com

Overcoming a roadblock by Republicans, the Senate today passed the Small Business Lending Act, which will create tax credits and a lending fund for small businesses.

The bill passed 61 to 38.

President Obama, who helped craft the legislation, said that, once he signs the measure into law "small businesses and start-ups will see the positive benefits right away,"

At the end of July, the Republican effort blocked the bill from coming to a vote. The 41 GOP senators stood firm, denying the Democrats the one vote they needed for a three-fifths majority to move the bill to the floor for a vote.

Republicans said they were opposed to any spending measures while the deficit was so high. But Democrats and political observers from various ideological camps said Republicans were deliberately blocking a bill they would normally favor - indeed, much of the bill was written by Republicans - with the aim of hurting Democrats and bolstering their own party in the upcoming mid-term elections.

On Tuesday, however, Sen. George Voinovich, R-OH, having said publicly that the time for "messaging" was over because the country "was really hurting," crossed the aisle to join with the Democrats and advance the bill for the vote today.

Sen. George LeMieux, R-FL, also voted to move the bill to the floor.

Voinovich and LeMieux again joined with Democrats today to pass the measure.

The bill would, among other things, provide $30 billion in capital to small banks with incentives to increase small business lending; create the State Small Business Credit Initiative to strengthen state programs that support lending to small businesses and small manufacturers; eliminate capital gains taxes on certain small business investments, amounting to $12 billion in small business tax cuts; and increase the amounts of loans that the federal Small Business Administration could provide, especially for start-up enterprises.

The House passed a similar measure in June. Because the bill was amended by the Senate, the House will have to vote on the new version. The House is expected to do so next week. The measure will then go to Obama for his signature.

"We've been pushing this legislation for 18 months and it's about time the Senate is finally passing it," said Paul Merski, chief economist for the  Independent Community Bankers of America, one of numerous business groups supporting the measure.

Merski said the bill's three main components will benefit small banks, small businesses and the economy.

"The $30 billion loan fund will allow interested community banks to draw down funds from the U.S. Treasury to lend to small business," Merski said. "Because of the attractive interest rates, a community bank can leverage the loan 10 to 1. That $30 billion in funding can become $300 billion in loans to help small businesses."

The increase in SBA lending at reduced fees and with a government-backed guarantee will free up more capital for small businesses, Merski said.

"The $12 billion worth of small business tax cuts will free up cash flow and incentivize small businesses to make more purchases and hire more employees," Merski said. "That sort of activity will help the economy."

Merski said that the onus is now on federal bank regulators to quickly implement the new programs so that the expectations shared by the President, business organizations and others that small businesses will benefit at once from the legislation will be fulfilled.

"It's all about capital," Merski said. "Capital is king. We need to get the capital out into the system as soon as possible."

Among the organizations supporting the bill are the Conference of State Bank Supervisors, the Independent Community Bankers of America, 29 state banking associations, the Motor & Equipment Manufacturers Association, the National Association for the Self-Employed, the National Bankers Association, the National Federation of Independent Business, the National Small Business Association and the U.S. Hispanic Chamber of Commerce.

 "The Senate, under the leadership of Senators Reid, Baucus, and Landrieu, has taken a vital step forward to help provide small businesses with the critical support they need to expand and hire in their local communities," said U.S. Secretary of the Treasury Timothy Geithner.

 "Small businesses are the backbone of our economy and a critical source for growth. This common sense legislation to provide targeted tax cuts and increase lending will help spur the creation of private sector jobs and strengthen our nation's recovery," Geithner said.

To contact the editor, e-mail: