DANVILLE — Billions of dollars in federal Troubled Asset Relief Program money is being earmarked to help unclog rural credit lines and jumpstart the economy, the Obama administration announced last month.

But local lenders are still waiting for details of the new programs — touted as a follow-up to the federal government’s earlier “bailout” of larger-size banks — and wondering whether having more money to lend will actually increase lending.

“There are more angles to this than just money,” said Mike O’Brien, director of the Small Business Development Center at Danville Area Community College. “Some of my issues are really the banks’ issues right now.”

O’Brien is in charge of connecting small businesses looking for low-interest Small Business Administration loans to banks willing to take on the risk and low return. And right now, banks are being ultra-cautious in whom they loan money to.

“We’re not lenders; we try to facilitate,” O’Brien said. “We’re in the business of trying to ensure the people who are qualified get connected.”

Obama said the SBA would be upping the limits on its most popular loan programs used for equipment upgrade, infrastructure improvement and business expansion. Loan limits were more than doubled to a maximum of $5 million, though O’Brien said he is still waiting for the new rules to become official.

“It’s been running hot and cold,” O’Brien said of the number of recent SBA loan-recipient prospects. “In the last three months I haven’t had a flood of people in, but in the beginning of the year I did.”

He said in many situations, the slow economy was making facility expansion or purchase of new equipment difficult for companies as they ride out tough times and limited credit.

“It becomes a question of a bank taking on a customer utilizing the SBA guarantee,” he said. “In some cases they’ve been forced to be skittish and conservative. The banks won’t always make those riskier kinds of deals.”

O’Brien said he has been trying to enlist more banks willing to work within the confines of the SBA program.

“Right now the banks can jump on the bandwagon literally with a quick phone call,” he said. “I know they’re all doing what they can.”

A ‘Band-Aid’

First Financial Bank Executive Vice President Jim Mulvaney, who also heads the county’s Community Development Corporation and is a Vermilion Advantage board member, said he’s not sure whether more capital — also promised in the TARP plan — will help locally.

He said the real problem for bank customers — and therefore, the banks — is that incomes have lowered across the board and collateral value tied to property has decreased.

“It lowers your ability to pay what your debts are,” he said. “Really, the long-term answer is the recession gets over and we get back to normal business. The TARP money is a Band-Aid.”

There is the possibility, he said, smaller banks wouldn’t need or accept TARP money if offered because of the lack of qualified borrowers. He added, if the money is offered, some banks might be allowed to apply it as a balance to a high number of delinquencies.

“The money is already available to those people who are able to repay the money,” he said. “We’ve always been in the position to loan money. It’s the only way we make money.”

Mulvaney said the term “bailout” is a misnomer because banks are required to pay back the money, noting recent reports where some of the larger banks receiving the first round of TARP funds had begun doing just that.

“Do you call it a bailout when the bank gives you a $20,000 loan for a car?” he asked.

Details are still sketchy as well on how much help the Obama directive might provide for bank-backed community development projects.

The local CDC, a consortium of area banks and business leaders, already makes loans to businesses whose loss would take jobs with them. A recent example, TH Snyder, used a $100,000 CDC loan, as well as $200,000 in city block grants, to keep more than a dozen specialized carpentry jobs in Danville. Mulvaney said several businesses have benefited over the years from the use of CDC money and dozens of jobs had been saved.

“If the CDC is an eligible participant (in the new TARP program), we could turn it around and use it to keep business or attract business,” he said. “It tries to loan out what it has.”

Participating banks determine how much they can contribute to the CDC loan program. That means unless there are new strings attached to additional TARP funds, banks would also have the option of not adding new CDC money — again, because the loans are tied to qualified projects.

All of the cash reserves in the world won’t matter unless customers are in the position to pay back loans, at whatever level.

“If you’re not going to be able to pay it back, why would I loan it to you?” Mulvaney asked.