President Obama unveiled his plan to help small business yesterday. From the New York Times:
"Today, too many entrepreneurs can't access the capital to start, operate, or grow their business," Mr. Obama said. "Too many dreams are being deferred or denied by a form letter canceling a line of credit."...
The administration's plan included provisions increasing loan guarantees for small business to 90 percent of the loan value to encourage banks and other lenders to extend credit, and waiving the Small Business Administration's loan fees and requiring banks that received federal bailout money to report each month how much small-business lending they did.
When my students use phrases like "not enough" or "too many" without any supporting facts, they learn quickly that I will go right at these unsubstantiated assertions.
Recent surveys of small business owners don't seem to support Mr. Obama's "too many's".
A recent American Express OPEN survey I blogged about last month found that the number of small business owners saying that they have been affected by the tightening of credit has dropped significantly since October. A recent study by the NFIB Research Foundation found that access to credit was a distant third in its importance as an immediate problem from the current financial situation. 43% said slowing sales was their biggest worry, followed by unpredictability of business conditions at 23%. Only 9% cited inability to obtain credit.
Most small business owners have already figured out how to make it through the recession. They are cutting costs, getting back to bootstrapping, building up cash when possible, and cutting back on their debt.
The part of the plan that worries me the most is holding banks accountable for how much small business lending they do each month. The last time the government pushed bad debt on us we ended up with a real estate bubble pumped up in large part by the subprime lending that banks issued due to intense government pressures.
In spite of what we are being told, capitalism is not the cause of the current financial mess -- it is government meddling in the free market system to serve its own agenda.
Let's not let government meddling create a small business bubble by forcing too much debt into the system that is too easy for small businesses to obtain.
The surveys you cite included only existing small business owners in their samples. Entrepreneurs who are just starting a business may have different responses about the importance of access to capital and may order those responses differently.
Start-ups rarely get bank credit, even with SBA backing. 90% of funding comes from family, friends and the entrepreneur's own savings.
The government needs to let the economy be and let these entrepreneurial businesses jumpstart the economy on their own. I one-hundred-percent agree that the government is too involved in the economy. They need to look themselves in the mirror.
I have to agrree. In our practise we are finding that once the spigots stated shutting off, small business owners started adjusting to the reality of less capital availabilty; also with the slowdown of business there is lesser credit needed generally. Still the TALP program should bring some much needed relief to those looking for credit.
Some government can benefit from the understanding of greater needs for attempting entrepreneurial behavior, but President Obama keeps the success of many small businesses. If small business has given the chance to have an access for the increase of loans and gave-away capital, it's up to them how to handle it property. Same as, they have to adjust what really the company needs as to adjust for capital availability.