There’s more noise from Washington as politicians continue to respond to small businesses’ plea for looser credit.

This time, two senators – Mary Landrieu, D-La., and Olympia J. Snowe, R-Maine – are asking the Treasury to use bailout funds to guarantee bank lines of credit for small businesses.

In a letter to Treasury Secretary Tim Geithner, the two senators, who are members of the Committee on Small Business and Entrepreneurship, call the proposal a “common-sense solution,” saying it wouldn’t require Congressional approval and would give banks assurance that their loans will be repaid.

“Most critically,” the letter says, the proposal “will enable small businesses to obtain the capital they need to keep their doors open and employees on the job.”

Under the plan, in exchange for that government guarantee banks would be required to temporarily modify loans for “distressed but otherwise viable” small companies. The senators didn’t specify how much money this plan might require. The government has already said it will use $15 billion in TARP funds to stand behind SBA loans.

This isn’t the first suggestion from members of the Senate’s small business committee. Last week, Senators Landrieu and Snowe, together with New York’s Chuck Schumer, called for a specially appointed representative to help small companies export their goods and services.

Meanwhile, we continue to hear from small businesses that helping banks lend isn’t the way to help small-business owners. Many business owners don’t have the collateral or the cash-flow history to qualify for a bank loan. Entrepreneurs have historically relied on angel capital, venture money, personal credit and friends and family – none of which is easy to come by these days.

Wall Street Journal