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White House seeks input to help small business, outcome uncertain
By Jean Wojtowicz
Chair National Association of Development Companies
Perhaps realizing that small businesses create between 60% and 80% of all new jobs, the Obama Administration continues to make no small effort to stimulate that important sector of the economy.
The latest move: Treasury Secretary Tim Geithner and Karen Mills the Administrator of the Small Business Administration called together small business owners, lenders, members of Congress and others to brainstorm ideas for getting more financing to small firms.
As lenders to small businesses, I and several colleagues participating in the Small Business Financing Forum had a rare chance to speak directly to the Treasury Department, SBA and members of Congress. We said that we appreciate efforts taken so far by the Administration and Congress. Those efforts enhanced the SBA loan programs and made more credit available to small businesses.
Varied business owners at the meeting were also appreciative. They were from all over the country and all are experiencing the recession to some degree. They owned a trucking company, software installer, luxury bedding distributor, a construction company specializing in green building practices, a public parking company and several Dunkin' Donuts restaurants.
Together, lenders and owners identified four priorities for the White House and Congress:
- Make it easier for small businesses to get more expansion funds. One way is to allow more companies to qualify for alternative lending programs such as the SBA 504 loans, and broaden the range of uses of the programs. This includes increasing the size of companies that would qualify for SBA financing and raising the SBA loan ceilings from the existing $2 million to $5 million per borrower. Since the SBA 504 program runs at zero cost to the government, it would cost nothing to offer businesses more credit
- Encourage more banks to participate in lending to small businesses by reducing the "hassle factor" of applying for loans. The American Bankers Association even offered to assist the SBA in getting more banks into these programs
- Expand the role of certified development companies in lending funds by allowing the 504 loan program to be used for refinancing of existing loans that are backed by fixed assets
- Controlling program costs for lenders by expediting collection and liquidation efforts
Those steps will stimulate small business' access to affordable credit. Most companies need credit to buy new equipment or to finance inventory. Store owners usually buy everything from trucks to pencils on credit and pay the lender when they sell the item.
Some of these suggestions will require legislative action; others can be accomplished administratively.
The recommendations made by the lenders and business owners at the Treasury Department are being shaped into legislation and potential presidential orders.
Business credit is always a risk. When used wisely, responsible credit can help fuel the economic recovery. Business owners and lenders should explore all the options available to them.
Hopefully, local businesses along Main Street will see new credit available to them early in 2010.
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