Many many small business owners have not been able to get a small-business loans, and have walked the treacherous lines of relying on using credit cards and 401(k)’s to fund their businesses.
Business has gone well, sales are up, but they have been able to receive or acquire an expansion loan.
Complete frustration has set in, nobody is considering small business owners seeking loans so that they may expand their business.
The initiatives announced last week by the President, and a separate proposal this month aim to fix such quandaries.
They want to create a $50 billion loan fund for small businesses by taking $40 billion of the remaining Troubled Asset Relief Program money and adding $10 billion that would be raised from banks of all sizes. The president’s plan would increase the top limits on Small Business Administration loans and provide lower-cost capital to community banks, credit unions and community development financial institutions. He’s asked the Treasury Department and SBA to confer with Congress members, lenders and small-business leaders to determine additional steps to help businesses.
Many small-business owners and industry experts praise the proposals but say they are a little late in coming.
Until the latest proposals, the government has given TARP funds to major banks so they could be strengthened and help stimulate the economy.
But that just resulted in banks hoarding cash and providing an insufficient number of loans to small businesses, says Terry Brandt, executive director of Albina Opportunities Corp., a non-profit organization that provides entrepreneurs access to capital. Community-based lenders have been shortchanged in the process, he says, even though they are the primary source of most small-business loans.
And while much of the attention has been on SBA loans, which are primarily for business expansion, most small-business owners need a short-term line of credit to pay for contracts and workers, says Todd, president of the National Small Business Association.
“That is where the biggest crunch seems to be right now,” he says. And those revolving lines of credit traditionally come from a local bank. Warner says that his plan could be used for short-term bank financing that can fill the gap until the market recovers.
Mr. Dagle, a small-business owner of Sports Systems Services in Fort Lee, N.J., says that he has been laughed off when he has asked banks for a line of credit. But he needs working capital for day-to-day operations and to hire five more people. He says he needs it right now.
Warner says he understands such urgency. “We’ve got to move quickly,” Warner says. “This is something that is a real time problem for small businesses across America.”
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