President Barack Obama is on the verge of creating as much as $300 billion in credit for small businesses as bankers raise doubt about whether there’s demand for new loans and how much will be repaid, Bloomberg reported.

The U.S. Senate may vote this week on a bill to funnel $30 billion of capital to community banks, whose business customers typically are small firms. Banks could leverage the sum to make $300 billion in loans that create jobs, according to a Senate summary. That could more than double the commercial and industrial loans at eligible banks as of the first quarter, according to data compiled by KBW Inc.

Bankers say the problem isn’t scarce credit, it’s lack of demand from creditworthy firms in a weak economy. The result may be more loans given to distressed firms and higher losses. Although bank regulators don’t compile default rates, the biggest lenders have charge-offs of 4 percent to 14 percent tied to small businesses. Eliot Stark, managing director at Capital Insight Partners Inc., said their credit record resembles “junk.”

Terms call for banks with assets of less than $10 billion to receive U.S. Treasury Department investments in preferred stock or other instruments to promote small-business loans, according to Senate documents. Banks will be charged an initial interest rate of 5 percent, declining to 1 percent if they increase small-business lending. Rates will rise to 7 percent if loans stay the same or decrease.

The legislation is supported by Independent Community Bankers of America, the American Bankers Association and the National Federation of Independent Business, Bloomberg said.