Obama Announces Small Business Lending Plan
Source: Wall Street Journal
President Barack Obama announced a $30 billion lending program Tuesday to give banks funding needed to support small business in an effort to bolster the weak economy.
“It’s one thing to have an honest difference of opinion on something. It’s another to walk away from your responsibilities to confront the challenges facing this country because you think it’s good short-term politics. That’s what we can’t afford,” Mr. Obama said during his speech at a town hall meeting at Nashua High School North.
The administration’s proposal would invest $30 billion from the government’s Troubled Asset Relief Program in community banks to encourage them to lend to small businesses. If approved by Congress, the program would encourage small- and mid-sized banks to provide loans valued at several times that figure. The lending program is part of a broad package of jobs-growth proposals that Congress will consider in coming days. Republicans in Congress said Tuesday they object to using TARP money as a “piggy bank” for new spending.
Banking industry advocates said the program must be structured so banks don’t avoid it as politically motivated, or burdened with excessive restrictions.
“Banks will not touch this if it is under TARP or if there is any possibility of some stigma being attached,” said Ed Yingling, chief executive of the American Bankers Association, who supports the idea. “The other issue is the need for regulatory approval. If you are a bank with plenty of capital, then you won’t be interested. If you are a bank that could put some extra capital to use, will the regulators approve it or will they be concerned about even one such bank eventually failing and making them look bad?”
Lending Matters
Tarp funding was made available to the fat cats of corporate financing in 2009. Now, it seems, it’s the little guys turn and, if small business finance options are made available quickly, the government predicts getting the small business owners up and running would provide a much-needed jolt to the economy. But even with access to quick business loans, jobs will remain a key factor when it comes to small business output, so the jobs market has to also be a part of long-term capital investments. In addition, commercial property financing is also sorely needed to help small business owners get the capital they need to secure a location.
Under the proposed program, Treasury would provides capital investments in a swath of the nation’s 8,000 banks with assets under $10 billion, which do more than half of U.S. small business lending.
Banks that increase lending to small businesses beyond 2009 levels would qualify for reduced dividends owed to Treasury on the capital investment. White House economists hope that feature will spur interest in the program among community banks that shunned the original TARP program because of restrictions on the capital and worries that they would be tarred by their competitors as “troubled.”
Last week, President Obama announced a separate $33 billion program to provide up to $500,000 in tax credits for businesses that add jobs or increase wages beyond the rate of inflation this year. In the 2011 budget blueprint released Monday, the administration also proposes to eliminate all capital gains taxes on small business investment and raise the limit on Small Business Administration loans from $2 million to $5 million.
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My Take: Everyone knows that small business is the backbone of the American economy. Without a solid core there, we are soft in the middle and vulnerable to further economic crisis. Funding for the small business owners, whether he or she is a carpet cleaning service, a day spa, a restaurant, or a fledgling San Diego construction lawyer, is critical.
Let’s say you’re a small company providing payroll solutions to the San Diego landlord tenant lawyer or one of the top medical equipment companies across town. You’ve had a rough couple of years wading through this economic tsunami, falling behind perhaps on the mortgage on your business location, and you desperately need some help. What do you do if you can’t obtain that help with a viable commercial loan workout? Workers could lose jobs and your business would tumble under the weight of having to relocate. Clearly it makes sense for the government to now transfer those TARP funds over to the little guys. The big banks are on their feet now, and thankfully many of their corporate officials are being held accountable for their part in the meltdown. Now, let’s get the backbone back in shape.
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Payroll Issues
Did you know that one of the leading issues for the small business owner is keeping track employees’ time and attendance? Payroll issues play a significant role in operations costs for any company. In-house accounting help is one option, but you can also turn the accounting over to an outside expert, where all of your employees’ payroll activity is taken care of for you, from the paychecks and tracking hours in the field, to clock in- out times and expense report checks, and even reimbursement checks for traveling or medical costs for patients with diabetes or other health issues.
