Small Biz Promises: Where Obama Stands
Recent efforts to help small businesses haven’t mirrored those implemented in the aftermath of 9/11, but new measures from the stimulus have been productive.
Obama’s $787 billion stimulus plan includes incentives for banks to make more loans backed by the Small Business Administration. The program temporarily reduces fees associated with those loans and ups the loan guarantees to 90%.
The plan also calls for a new initiative known as “America’s Recovery Capital,” which allows viable small businesses to receive interest-free loans of up to $35,000 to pay down existing debts.
But lending activity remains down, primarily because banks still see small business loans as a huge risk.
(According to one analyst’s report, their 2008 failure rate hit almost 12%, compared to 2.4% in 2004.) Banks also hesitate before making SBA-guaranteed loans because they cost a great deal to administer — regardless of the loan amount — and because the agency can back out of these guarantees even after banks make the loans.
Photo by edopter.com.
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