Access to credit is crucial to small companies, and President Obama is banking that increased lending to entrepreneurs will spur the creation of small businesses and the resulting increases in hiring, and capital expenditures.

Early in 2011, the Obama Administration introduced Startup America, an initiative to inspire and accelerate entrepreneurship throughout the country. Its stated goals are to promote entrepreneurship; increase the number of new firms creating economic growth, innovation and quality jobs; and inspire and empower greater diversity of communities and individuals to build great American companies. The initiative sought to expand access to capital, support mentorship programs, and strengthen commercialization of the $148 billion in annual federally - funded research and development. So far, Startup America has created a lot of buzz, but not much else.

The President pushed hard for the passage of the Small Business Jobs Act, which created a $30 billion lending pool from which smaller banks could draw upon and lend to startups and other expanding businesses. Thus far, the Small Business Lending Fund has produced mixed results, partly because some small banks feel that there is a TARP-like stigma attached to participating in the fund and because they fear the regulations that came attached to the TARP funding two years ago.

However, there are signs that the credit markets for small businesses is loosening. Smaller lenders, such as community banks, credit unions and non-profit financial institutions, are still the drivers in startup lending. They are less stringent in their lending parameters, know the local communities in which they operate, and generally more willing to give a local startup a chance. Because of the advantage of the Internet, they can make loans not only in their local areas but also across the country. Biz2Credit frequently connects borrowers in one state with lending institutions in another – sometimes on the opposite coasts of the United States.

Big banks also are opening up the purse strings, but their actions have yet to match their press releases. Many large financial institutions have announced with much fanfare that they planned to add staff to service the small business community. However, if you ask small business owners, they often will tell you that the bigger institutions are harder to deal with and that they receive better service and more funding from the smaller lenders – sometimes at more attractive lending rates.