Of all the initiatives the government has taken recently to get credit flowing to small business again, the one pointed thing they haven’t done is put money directly into the hands of entrepreneurs. That’s been galling for many small business owners who say it’s unfair to give money to floundering banks—many of whom contributed to the current economic crisis. Two big-name senators apparently agree, and are asking the Treasury to extend lines of credit directly to entrepreneurs. Well, via banks. Sen. Mary Landrieu, a Democrat from Louisiana, and Olympia Snowe, the Republican senator for Maine, both of whom are on the Committee on Small Business and Entrepreneurship, wrote Treasury Secretary Tim Geithner a letter this week asking that the TARP program guarantee lines of credits, reports the Wall Street Journal. Here’s how the plan would work, in Landrieu’s and Snowe’s words:

“In exchange for [a] government guarantee, banks would be required to temporarily modify the terms of the credit line to help the distressed, but otherwise viable, small business borrower. This common-sense solution, which will not require Congressional approval, benefits all parties. It will provide banks an assurance that their loan will be paid, but, most critically, it will enable small businesses to obtain the capital they need to keep their doors open and employees on the job.”

While banks are serving as a middle man in this plan, the money to guarantee the loan (should the lender default) would come directly from the Troubled Assets Relief Program.

What do you think about this new proposal? Does it seem like a more effective solution than those initiatives currently in place?