The President is headed to New Hampshire today (hey Obama, it’s not 2012 yet!) to propose a plan to take $30 billion in TARP funds and shift them to community banks for small business lending. This is a proposal that the AFL-CIO included in their jobs plan, and it seems like an excellent use of the TARP.

The funding would be limited to small and mid-sized community banks (with assets under $10 billion) which have a track record of small business lending. It would be offered under separate legislation from the TARP so community banks would not face the same restrictions, encouraging their participation. The hope is that the banks could leverage this capital infusion, which is how it will be structured, to lend well beyond the $30 billion offered. The terms of the capital investment would encourage this kind of lending, if it works as planned.

A fact sheet on the full proposal is available here.

In remarks later today, President Obama will talk about this lending fund and all of the supports for small business proposed:

Small businesses like this have created roughly 65 percent of all new jobs over the past decade and a half. And I think we should make it easier for them to open their doors, expand their operations, and hire more workers. That’s why I’ve proposed a new tax credit for more than one million small businesses that hire new workers or raise wages – and a tax incentive for all businesses to invest in new plants and equipment. And while we’re at it, we should eliminate all capital gains taxes on small business investment, so these folks can get the capital they need to grow and create jobs […]

That’s why today, I’m announcing a proposal to take $30 billion of the money that was repaid by Wall Street banks, and use it to create a new Small Business Lending Fund that will provide capital for community banks on Main Street. These are the small, local banks that work most closely with our small businesses – that provide them their first loan, and watch them grow through good times and bad. The more loans these banks provide to creditworthy small businesses, the better a deal we’ll give them on capital from this Fund. Combined with my proposal back in December to continue waiving fees and increasing guarantees for SBA-backed loans, this will help small banks do even more of what our economy needs – ensure that small businesses are once again the engine of job growth in America.

If all of these plans come together, small business would have every opportunity to get funding for worthy projects and begin hiring again. But of course, these have to get through Congress.