Why does the government as a small business lender by offering them loans?

The government rarely serves as a lender on small business loans, instead indirectly providing guarantees for lenders to make small business loans with borrowers who may be considered higher risk. The government does this to encourage more lending in hopes of growing the economy by allowing more small businesses to form. In certain extreme cases, the government has acted as a direct lender. However, these situations are far and few between and typically reserved for times in which no other lender has the capital to make a small business loan.

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