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$15 billion from TARP Funds committed to SBA Loans: PR Move or Real Help for Small Business?
By: Donna Ray Berkelhammer. This was posted Tuesday, March 17th, 2009
Loading ...President Obama and Treasury Secretary Timothy Geitner announced Monday that $15 billion of the Troubled Asset Relief Program (TARP) will be committed to the Small Business Administration (SBA) so that the government can purchase SBA-backed loans from the banks that have originated them. The SBA FAQ is here. SBA lending has crashed with all other lending lately, and this initiative is aimed at increasing the credit available to small businesses.
SBA loans generally are offered to small businesses that can’t get loans through normal lending channels. The SBA guarantees the loans to local lending institutions. Clearly, small businesses are the backbone of the American economy. They provide much of our jobs, growth and wealth.
Will directing funds to guaranteeing small business loans really help these small businesses who need it the most? Many commenters to the Washington Post and Business Week stories on this initiative are leery. The Wall Street Journal claims these loans help the wrong kinds of businesses; most growth and jobs will come from “knowledge” businesses such as engineering firms, software development, consultants or biotechnology, while SBA funding is difficult to obtain for these types of companies without inventory, equipment, real estate or other tangible assets.
Many small business owners are more concerned about the hidden impact of proposed new taxes on health benefits, energy and income.
What do you think? What do small businesses need now from the government and the rest of us?
Tags: Business Week, cap-and-trade, SBA, Small Business Administration, TARP, taxes, Troubled Asset Relief Program, Washington Post
I don’t see the program as having a substantial impact on small businesses. According to a recent (Feb 2009) survey of small business owners, 90% have never applied for an SBA loan. (See http://www.discovercard.com/business/watch/)
In addition, as the post points out, many intellectual capital companies are not eligible for SBA loans, and that has regional implications, particularly in the Triangle where such companies dominate the small business landscape.
But the real impediment to small businesses today is the economy generally. And while it is not getting much play in the press…which is chasing the minor inanities of Madoff and AIG bonuses…there is a coming consumer credit crisis. Many of you reading will no doubt have received notifications from your credit card company that they have raised your interst rate. The Treasury Secretary is still “a few weeks” away from having any substantial plan for anything.
The race is on…if the administration doesn’t come up with a plan soon, there will be new waves of crisis wracking the economy that will render the freeing up of SBA credit all but useless. Small businesses need buyers more than they need money to generate more unsold inventory.
Posted by: Scarlet Knight | March 17th, 2009 at 8:16 pmAmericans for Tax Reform have put together a list of 10 things that can be done to help small business. Here is a link to a .pdf version of the article:
http://www.atr.org/userfiles/031709la-smallbizfix.pdf
Posted by: Scarlet Knight | March 18th, 2009 at 6:37 am