If you’re a small business in trouble and you have hopes of receiving some type of government aid via TARP funds, I would be cautious about managing your expectations and looking to other sources or your own ingenuity to battle your way out of the economic crisis.

While reports have come out that the Obama administration is looking to encourage small business lending by smaller banks through using some of the TARP money available for investment, you read through them and wonder why even bother bringing it up at all, as there seems to be so many caveats to it that there is little hope of true main street small businesses will be the beneficiaries of it.

For example, the definition of one unnamed senior administration official of small business is those with assets of $1 billion or less. Small business is now defined as up to $1 billion in assets. Guess who’s going to be the priority businesses receiving that money if it is indeed offered? Not main street businesses, that’s a given.

Of the original $700 billion in U.S. Treasury’s Troubled Asset Relief Program which was approved by Congress, about $138 billion remains, according to estimates of the special inspector general of the program.

After a period of consultation with community banks, it is expected a decision on how much TARP money will be provided will be made by the end of 2009. 

Another obvious concern, which generates the question of whether the available funds would target small businesses alone, is if this plan would include commercial real estate as well, which would undermine the stated purpose of providing the funds for loans: creating jobs.

In order to qualify for the loans, the community banks would have to prove they have no need for the funds in order to survive. Too bad that wasn’t what they did with the giant banks. This is double standard of course, but that’s a different discussion.

Anyway, the banks would have to agree to use the cash to offer loans to small businesses, which is why proof of stability would be sought. My thought is that should already be known by government agencies if they’re doing their jobs right, which of course they haven’t been.

The details of the proposal at this time are to create an new program within TARP itself, which would have access to $40 billion of the remaining funds in order to aid new lending to small businesses. There is also the idea of looking for an additional $10 billion in private funds.

Operationally, it’s desired that the funds would be available almost immediately to business already in operation, and not to start-ups or real estate development companies, as mentioned earlier.

Concerns about this, other than the unproven assumption guidelines will be strictly followed, is the already coming disaster in commercial loans expected throughout 2010, which will put a lot of strain on banks already under tremendous pressure. To add to that in an already weakened economic environment, in many ways, makes no sense.

What new markets are opening up that would justify these loans, and what types of jobs would be created by them? Where in the U.S. economy is business growth happening that could justify more loans to businesses, which could result in them possibly being in even bigger trouble than they are now.

Most of this initiative is being brought about because of the rightful criticism of TARP money flowing to huge businesses, while Main Street small businesses continue to suffer. In other words, it’s getting political again, which never ends up working in the  market in the way envisioned by those politicians attempting to gain political points.

This doesn’t mean there aren’t legitimate small business needs out there, there are. What it means is those of us running small businesses shouldn’t look to this in a way that we count on it to survive or not. For most small business owners, even those defined as having assets of $1 billion or less, won’t be seeing much of this money, if any, and again, I would look elsewhere and try to grow internally rather than hoping you’ll get a piece of the TARP funds. It’s likely not to happen, and even if it does, it’ll take time for it to be put into place.

I’m not even being cynical here, although some cynicism is definitely warranted. We must face the economic conditions as they are and with the brains and ingenuity that created our businesses in the first place. Looking for a bailout is a bad way to turn from what made the business successful in the first place to relying upon the government to help you succeed.

But whether you agree with that or not isn’t the reason I’m mentioning it, the reason I’m mentioning it is so you don’t put your hope falsely in the TARP funds when the chances of receiving any of the money is low at the very best.