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Will White House Small Business Aid Result in Small Business Loans?

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in The Business of Business Finance

The short answer is NO.

Here are just three of the top reasons why the political rhetoric coming from Mark Warner, (D- Virginia),  Christopher Dodd (D-Connecticut) and the White House today will likely have very little impact on small business owners in search of working capital or business loans.

1. It is anticipated that the White House will raise the limits on government-backed small business loans. While that may sound appealing to the few politicians that understand its impact,  it does not focus on the real problem.  It’s not the lending caps, it's the qualification for loans.

This suggestion comes months after the Treasury Department’s March announcement of a $15 billion program to purchase pools of SBA loans, which so far has not been implemented. 

If the White House really wants to provide loans and free up capital for small business owners, it will implement this repurchase program.

2. We expect to hear plans to “re-emphasize” community bank access to the TARP.  Only in politics does “re-emphasizing” count as policy change or anything substantive. 

Community banks do not want to access TARP funds, because they are prohibited from charging any fees on the lending they make.  Other than our government, an enterprise can not survive without charging reasonable fees for the services it provides.

3. There is a legal requirement that anyone participating in TARP sell warrants to the government giving the U.S. the right to purchase common stock at a set price.  This is a complete non-starter and must be eliminated if President Obama is sincere in his desire to help get working capital and loans to small business owners.

I’m interested to hear your thoughts… Is it rhetoric or real change we can believe in?

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