Will Obama’s plan to increase lending for small businesses help? You decide.

 

The focus of the federal government finally and rightly has changed to helping small businesses, which generate the great majority of new jobs in the United States.  President Obama, aiming to imbue millions of unemployed Americans with hope, has proposed several ideas that he believes will spur job growth.  As a result, the debate on Capitol Hill regarding the soundness of his plans is heating up.

From what I have been able to determine thus far, there are two feuding factions: On one hand, there are those who believe that the key to stimulating job growth is increasing lending to small businesses.  On the other hand, there are those who believe that the solution lies in tax and regulatory relief. 

While there are certainly benefits to both approaches, tax and regulatory relief are the best option for small businesses, in general.  Here is the main reason: Tax and regulatory relief can be applied quickest and to more businesses, regardless of credit status. The other option, increasing lending, requires a much longer process to implement and has a high probability of gridlock. In a nutshell, there is a high risk of it not working at all. (After I peruse the president’s plans in detail later this week, I will share more reasons and details in a future post.) 

For now, I am most interested in your thoughts.  If given the choice of access to more capital or tax and regulatory relief, which would you choose?

Comments

[Kevin D. Johnson]

Latin Thunder, your story is consistent with what I have been hearing lately, especially as it relates to Chase denying good customers and changing its terms with businesses. Did the program to which you applied give you specific reasons as to why you did not receive a loan?

A propósito, me encanta tu nombre. (By the way, I love your name.)

[Latin Thunder]

I am skeptical. I applied for SBA’s America’s Recovery Capital Loan. My company met all the qualifications and I devoted a week of my time to fill out and submit all the paperwork. Two different banks turned me down, one being Chase who has my debt... whom I have had a solid track record with for over 21 years.

http://www.sba.gov/recovery/arcloanprogram/index.html

After reading more about people's experiences with these lenders, it seems that the banks are trying to appease the Feds who bailed them out by saying they are participating lenders, however, the truth is that they are not approving these loans because they are not relatively profitable for the banks.

I have such a distaste for banks right now. Our taxpayer dollars helped save them from their self-imposed demise, yet they are not willing to help the qualified taxpayer, their very own customers.

[Meredith]

Kevin, I think it depends on the business you are in. I am in retail and I need access to capital to buy inventory, especially right before peak revenue times. The tax breaks are fine but too restrictive in terms of availability. I need the flexibility to run my business and be successful.