Senate passes long-stalled small business bill

WASHINGTON (Reuters) - The Senate on Thursday passed a long-stalled measure that would boost lending to small businesses, giving President Barack Obama's Democrats one of their last chances to show voters they are working to revive the sluggish economy.

The 61 to 38 vote sends the measure back to the House of Representatives, which has passed a similar bill and is expected to quickly approve the Senate's version.

With the unemployment rate stuck at 9.6 percent, voters cite jobs and the economy as their top concern and say Obama has not done enough on the issue.

Republicans are poised to rack up big gains in the November 2 elections and could win control of one or both chambers of Congress.

If the measure clears Congress, it would be a rare victory on the job-creation front for Democrats, who have seen many of their other efforts blocked by Republicans this year.

Republicans have characterized the bill as a bailout along the lines of the unpopular Wall Street bank rescue effort, and blocked action at the end of July. Returning from a monthlong break, two Republicans broke with their party on Tuesday to give Democrats the votes they need to advance the bill.

"While I'm grateful for this progress, it should not have taken this long to pass this bill," Obama said on Wednesday.

Smaller firms have complained of trouble getting access to credit after the 2007-2009 financial crisis, when many banks sharply pulled back their lending activity.

SMALL BANKS TO HELP SMALL BUSINESS?

The bill, backed by industry groups, would create a $30 billion fund that the government would invest in independent community banks to encourage lending to small firms.

It would also exclude from taxes all capital gains on sales of small-business stock, and ease tax rules for expending and depreciating equipment. Tax breaks in the bill total $12 billion.

Democrats estimate the measure could create 500,000 new jobs. Some 8 million jobs have been lost since the recession began in late 2007.

Republicans, meanwhile, have invoked small businesses as they oppose an Obama proposal that would raise income taxes on the wealthiest 3 percent of U.S. households, arguing it would snare many who file business income as personal income.

Republican Senator Charles Grassley said he supported the bill's tax provisions, but not its lending facility.

"The small-business fund in the bill just doesn't have enough safeguards in place to ensure that recipients are credit-worthy or that the taxpayers will be made whole in the end," Grassley said.

The government's definition of a "small business" varies by sector, but typically encompasses firms that employ fewer than 500 workers or take in less than $7 million in annual revenue.

(Additional reporting by Kim Dixon, Editing by Vicki Allen and Jerry Norton)