Washington seems to only have one solution for any economic problem -- debt. Want to stimulate housing? Pump in debt. Want to rescue banks and big business? Pump in debt. Want to stimulate consumer spending? Manipulate credit card rules to encourage more debt.
And now their solution to helping small business? Pump in more money for SBA loans.
Susan Eckerly, senior vice president of the National Federation of Independent Business, hit the nail on the head regarding this strategy.
"...[I] is not the silver bullet that is going to propel small business owners to start hiring again. The primary problem facing small business owners right now in terms of job creation is not access to credit, it's a lack of sales, customers and confidence. Small business owners are unlikely to invest in hiring or expanding their businesses when sales and profits are so weak.
"Following in the weak economy, small business owners are worried about the threat of increased taxes, new healthcare mandates, higher energy costs and more regulations from Washington. Small businesses don't need more programs from Washington; they need lower taxes and fewer intrusions from government so they can take the calculated risks to expand their business."
I could not agree more. Debt is not the answer. Certainly access to credit is important over the long-term, but we have structural problems in our entrepreneurial economy that are tied to high and complex taxes and over regulation. But easy access to credit right now will make matters worse for many of these small firms by adding debt load to their overhead and doing nothing to improve their sales or their long-term cash flow.
Worse yet, the SBA Loan program has a long history of being as much about social engineering as it is about helping small businesses.
And now their solution to helping small business? Pump in more money for SBA loans.
Susan Eckerly, senior vice president of the National Federation of Independent Business, hit the nail on the head regarding this strategy.
"...[I] is not the silver bullet that is going to propel small business owners to start hiring again. The primary problem facing small business owners right now in terms of job creation is not access to credit, it's a lack of sales, customers and confidence. Small business owners are unlikely to invest in hiring or expanding their businesses when sales and profits are so weak.
"Following in the weak economy, small business owners are worried about the threat of increased taxes, new healthcare mandates, higher energy costs and more regulations from Washington. Small businesses don't need more programs from Washington; they need lower taxes and fewer intrusions from government so they can take the calculated risks to expand their business."
I could not agree more. Debt is not the answer. Certainly access to credit is important over the long-term, but we have structural problems in our entrepreneurial economy that are tied to high and complex taxes and over regulation. But easy access to credit right now will make matters worse for many of these small firms by adding debt load to their overhead and doing nothing to improve their sales or their long-term cash flow.
Worse yet, the SBA Loan program has a long history of being as much about social engineering as it is about helping small businesses.
I could not agree more. Debt is not the answer. Certainly access to credit is important over the long-term, but we have structural problems in our entrepreneurial economy that are tied to high and complex taxes and over regulation. But easy access to credit right now will make matters worse for many of these small firms by adding debt load to their overhead and doing nothing to improve their sales or their long-term cash flow.
No kidding!
My business has plenty of access to credit right now.
If I used up my entire line of credit, I'd be worried about my ability to pay it back.
I am focused on trying to increase sales and net income, while reducing expenses. Period.
I can't imagine signing away my soul for an SBA loan for a start up. Start ups are risky. Especially ones that are financed with loans instead of bootstrapped. (I bootstrapped my business, so I'm biased, I'll admit.)
What happens if your start up fails? With an SBA loan, you are PERSONALLY on the hook to pay it back. The SBA requires a personal guarantee for their loans. (If I am wrong, please correct me with a link, someone.)