Stimulus plan shortchanges small business
Smaller companies are heart of our economy
By Staff Editorial
August 26, 2009
Out of the $787 billion contained in the American Recovery and Reinvestment Act, a paltry $730 million is being directed to the Small Business Administration to help loosen up the tight credit market.
According to Census Bureau statistics, 98 percent of the country’s companies employ fewer than 100 people yet account for 97 percent of all net new jobs.
And those small businesses provide jobs to 50.2 percent of the private sector workforce and more than 90 percent of technical innovations and patents.
The American Small Business League reports another startling census figure: Large businesses have not created one net new job since 1977.
Small business is getting the very short end of the stimulus stick. Recovery plans fail to adequately address the likely savior of the economy.
Rep. Vern Buchanan, R-Longboat Key, discussed that imbalance Thursday at a luncheon with Manatee County business leaders, putting a total stimulus investment in small business at $21 billion — only 3 percent of the total.
“This has been the most anti-small business administration I’ve seen,” he told the gathering.
Looking at the census data, the road to recovery looks like it will be mostly dependent on small business. So why isn’t the Obama administration directing more resources toward the country’s employment and innovation backbone?
One program appears lacking at this point.
The SBA’s effort to unlock the loan market offers incentives to lenders — such as guaranteeing so-called emergency microloans of $35,000 — yet financial institutions remain tight-fisted.
While the banking industry blames excessive SBA red tape, others point to the low profit margin over the six-year life of the $35,000 loans and the resulting reluctance from lenders to get involved.
These emergency bridge loans — budgeted at $255 million of the total SBA allocation of $730 million — could save thousands of small businesses, but only a small percentage of the money has been extended since the program launched in mid-June.
Financial institutions should be considering the long-term viability of local economies, extending these interest-free loans to struggling small companies with the goal of keeping them in business and retaining jobs, all to keep money flowing around a community — and back into bank vaults.
But the SBA should make this program less onerous on lenders, too, by eliminating and streamlining some of the paperwork.
The American Small Business League cites another major problem, this concerning government contracts allocated to small companies but ending up with corporate giants.
Over the past six years, numerous federal investigations found that billions in government contracts earmarked for small business instead went to Fortune 500 companies. The league concluded that the Obama administration’s recovery plans continue that outrageous practice.
The administration and Congress must step up with legislation banning the diversion of small-business contracts to large companies.
Buchanan pledged to seek greater assistance for small businesses in a meeting with the Herald’s Editorial Board. We would expect nothing less from a successful businessman.
If the stimulus package is all about saving and creating jobs, small business must receive far greater attention. As census figures show, as small business goes, so goes America.