The House passed two bills that would provide community banks with cheap capital to increase lending to small businesses and give investors a tax break for purchasing stock in small corporations.

The two bills, however, face an uncertain future in the increasingly cost-conscious Senate.

The Small Business Jobs and Credit Act, which passed the House June 17 on a 241-182 vote, would create a $30 billion fund that banks with less than $10 billion in assets could tap. The bill includes incentives for banks to use this money to increase lending to small businesses—the more loans they make to small firms, the lower the dividend rate they would pay the government for this capital. Banks also would have to submit a plan on how they would use the capital to increase small-business lending.

The Independent Community Bankers of America estimates the fund could result in $300 billion in additional lending to small businesses.

"We're happy to see it move," said Molly Brogan, a vice president with the National Small Business Association.

Many of NSBA's members haven't been able to get the credit they need, she said.

The legislation also would provide $2 billion to support state programs that encourage banks to lend to small businesses. In addition, it would create a new $2 billion fund at the Small Business Administration to encourage equity investments in small companies. This would revive a Small Business Investment Companies program that was killed during the Bush administration amid concerns over mounting losses.

Democrats contended the Small Business Lending Fund would not increase federal budget deficits because banks would repay the capital they receive, with interest, over the next 10 years.

"It is estimated to make a profit for taxpayers in the long run," said Representative Melissa Bean, a Democrat from Illinois. "And the money will ultimately go not to banks, but to the small businesses and their communities that they lend to."

Most Republicans, however, opposed the bill, contending it was another bank bailout. They said there was no guarantee the banks would use the money to increase lending to small businesses. They fear only weak banks would tap the fund, which would increase the risk that taxpayers would lose money on this program.

"This bill will not do anything for small businesses," said Republican Representative Randy Neugebauer from Texas. "But it will put the taxpayers, again, at risk to underwrite and to invest in banks."