Bankers wary of Obama small business lending plan

He said some small businesses have been hesitant to reach out to banks for a loan because they have been rejected multiple times by risk-averse banks.

The bankers said the SBA loan program has promise but involves a lot of paperwork and takes a long time to process the loans.

The ABA's Tenhundfeld also said he doubts how much demand there is for loans in the $2 million to $5 million range.

Small businesses are a critical component of the U.S. economy, with more than 50 percent of workers on their payrolls, according to U.S. Census Bureau data in 2002.

As the economy shows tentative signs of recovery, there is some evidence that bank credit is loosening slightly.

In a quarterly U.S. Federal Reserve survey of bank loan officers in July, 3.7 percent of respondents said their lending standards had "eased somewhat" to firms with annual sales under $50 million, the first easing since July 2007. But 35.2 percent of respondents also said their lending standards had "tightened somewhat," indicating there is still a long way to go.

(Reporting by Karey Wutkowski; Editing by Gary Hill)