Small business bill passes, now what?
As President Obama gets set to sign off on the $30-billion small business lending bill, people want to know one thing: how will it help me?
That’s what small business owners like Bruce Freeman want to know. Freeman, who runs Proline Communications, a marketing and consulting business in New Jersey and writes a syndicated column “Ask The Small Business Professor”, said the the $12 billion in tax breaks included in the bill will help, but the larger $30-billion portion earmarked for small community banks should instead be given directly to small businesses.
“Give it to me. Don’t give it to somebody else to then hopefully, maybe, get it to me,” said Freeman, who would prefer to get the money in the form of tax credits, or some other more direct assistance. “Give it to me in the form of beer bottles with the name of my business on it, but give it to me. This loan stuff is ridiculous, because I don’t know if I could ever get one.”
Brian Miller, the president and COO of The Entrepreneur’s Source – a Southbury, Connecticut-based facilitator of startup financing – said the new legislation will only work if the government is able to get it into the hands of small business owners quickly.
“If it does not and we’re faced with the same kind of situation that we were with TARP, where the banks just sit on the money and they don’t get it in the hands of people that need it, then it’s going to be a colossal failure,” said Miller, who added his company is currently hearing from 10,000 people a month inquiring about financing, about a 25-percent increase from pre-recessionary levels.
Rohit Arora, who co-founded the New York-based website Biz2Credit to help small businesses get financing, said credit is virtually frozen right now and the government’s main lending arm – the Small Business Administration – has virtually stopped since the end of May, when TARP-assisted programs elapsed.
“Most of the mainstream banks are not lending money to small businesses in spite of all the announcements they (government) keep making,” insisted Arora, adding 85 percent of small businesses are making getting a loan a priority right now before interest rates start climbing again. “Community banks and smaller banks have started coming back, but there’s a lot of pressure from regulators that if they’re lending money they need to be more conservative.”
The government can make all the announcements they want. The fact is that the default rate on business loans loans is so high that the, the paltry return on investment is outweighed by the cost of trying to collect on non-payers. It is my understanding that the government does not reimburse these fees, only the loan itself. I read something about that on this site: http://www.merchantprocessingresource.co m/apps/blog/show/5857146-sba-loan-vs-mer chant-cash-advance
Remove the interest rate cap of prime + 2.25% on SBAs and maybe banks will have incentive to actually make the loans the government is always pushing them to do.