An Obama administration plan to bolster lending and access to capital for small banks and small business seems overdue given the billions shelled out last year to banks and businesses deemed “too big to fail.”

The initiatives would increase the limits on the size of loans from the Small Business Administration from $2 million to up to $5.5 million, depending on the program. Micro loan limits would be expanded from $35,000 to $50,000. Most SBA loans contain some kind of government guarantee to private lenders, but also require securing of assets as well.

The plan also aims to provide low interest capital to banks with assets of less than $1 billion, which would cover many community banks. The government through the Federal Reserve would provide capital to such banks at a rate of 3 percent, instead of the current 5 percent. Rates would increase to 9 percent after 5 years to encourage timely payback.

Some banks in underserved rural areas could get capital for as little as a 2 percent rate.

Obama told the Wall Street Journal that the big banks were not as much in need of Trouble Asset Relief Program funds, but noted the small banks and small businesses still have not gotten access to capital as a result of the program that mostly served mega banks.

The small business loans and small bank capital would be funded with existing TARP money and would not be dependent on paybacks from big bank TARP recipients.

While free market purists may see this expansion of a loan program something that leads down the same path as bailing out the big banks, we should remember that money will be mostly issued through programs already in place. The SBA has a history of operating in a straightforward fashion.

It’s important to make sure small businesses have access to capital in ways that allow them to compete with their big business competitors that received injections of federal money last fall.