More money to banks and nothing for the little guy
As his most recent answer to the small business crisis, President Obama just held a press conference to give more money to banks. As usual, it was just another photo op for politicians who continue to do nothing to solve the crisis for small business owners.
His new proposal is to raise the limits on SBA loans, which ignores the fact that the small businesses who need the loans still can’t get them. Since February, Small Business Administration chief Karen Mills and countless politicians on both sides of the aisle have continuously claimed they were creating programs to provide “immediate relief” for “distressed but viable” small businesses (Mill’s words).
The government provided $787 billion in bailouts for big corporations which couldn’t qualify for any type of loan. Nine months later, the majority of the paltry $255 million set aside in for small businesses is still sitting in banks unused. Now Obama’s going to give them more to sit on.
Another $15 billion set aside specifically for small business in March from the TARP program has done even worse – not a single dime of this money was loaned to anyone. GM got $30 billion in one day, however, with an expected $70 billion in loans before it’s all over.
It only gets worse.
The SBAs ARC loan for small businesses is 3/100th of one percent of the $787 billion bailout for small businesses, which represent 56 percent of the total gross domestic product revenue for the US. It’s not a piece of any pie, but an insultingly small crumb. And only businesses that don’t need it are getting it.
Imagine if the government had only given loans to the healthiest large corporations last spring and left GM and all the others to die on the vine? That’s exactly what they’re doing with small businesses. I didn’t need a loan but wanted to experience what all my clients were telling me was an untenable process.
My application for the ARC loan was 301 pages. Three weeks later, I received rejection letters stating the sole reason was my credit score, which is a 758, nearly perfect. We have impeccable personal and business credit and were rejected out of hand. We meet all other ARC loan requirements but never made it past the credit-scoring process.
And yet the administration’s answer to the inability of small businesses to get loans is simply to raise the credit limit. The disconnect here is simply stunning.
Distressed big businesses had billions thrown at them, but only healthy small businesses will get any help. Where is the parity? All this new program does is make it possible for a very healthy small business to get $50,000 instead of $30,000. Meanwhile, the “distressed but viable” small businesses that were supposed to get “immediate relief” are stuck watching the bag of money get bigger, but with no access to it.
The politicians are so out of touch with small business it’s difficult to describe that gap between their thinking and the reality that is out there.
President Obama has tasked Karen Mills to convene a panel and convention of SBA officials, politicians and small business owners to discuss these issues in the next few weeks.
If they want a true discussion to get this resolved, this will be a great opportunity to do it. But if they just want another empty photo op with small business owners to pretend they’re doing something to help, it will just be a lack of small business as usual.