New Plan May Give Small Businesses $700 Million in Loans

Democratic representative Charles Schumer from New York unveiled his $700 million stimulus plan for small business on Tuesday, as a direct response to the credit crisis for small businesses (Newsday). He plans to introduce the plan into the post-Presidential election discussion of a second stimulus package.

The plan would remove restrictions on the Small Business Administration’s ability to provide guaranteed loans to businesses (with good, not bad, credit) that are unable to procure credit from banks. This would entail waiving administrative lending fees and bolstering the SBA’s efforts with increased funding and expanded staff. SBA spokesman Mike Stamler voiced concerns about SBA’s involvement and ability to take on a larger role in lending.

The difficulty for small businesses to get loans hasn’t been exactly clear. While some pundits argue that banks have begun lending to smaller fish after the fall of commercial giants, others say that banks have become increasingly conservative in extending credit to anyone, much less small businesses. Newsday reports that, despite maintaining good credit for 10 years, small business owner Annemarie McMullen only received one quarter of the $40,000 loan she applied for and was forced to finance the majority of her payroll out of her own pocket. Schumer’s plan aims at reducing the instances of the above scenario by stimulating small business growth rather than stagnation.

In the midst of both Obama and McCain calling for relief to small business throughout the election cycle, Schumer’s proposal stands as the first real attempt to stimulate what everyone says affects over 75% of jobs in America– –Which is why it ought to be strictly scrutinized. The plan may never come to fruition. It may not even be factual (since I haven’t found anyone but Newsday reporting or blogging about it yet). And like every hopeful budget proposal this one begs the question(s): Where is the money coming from? How are we going to maintain strict oversight on expansion of this independent entity? What is the SBA, really?

With regards to the last question, there have been reports that post-9/11, the SBA lent leniently and incorrectly to businesses who were, in fact, not suffering from the World Trade Center disaster. Whatever the reason for the alleged flub, it’s enough to make one skeptical of their proposed role of the organization and to Schumer’s proposal in general. But at least now the governments really beginning to think about small businesses, right? Kind of. Asking the SBA to help small businesses weather the crisis is like telling cops to catch criminals (it’s part of their job description).

“Take care of your own” is what the plan seems to say. But everyone knows that small businesses don’t get bailed out. Although they account for 75% of the job market in the U.S., they don’t get bailed out. Why aren’t we using our own money to bail ourselves (read: small businesses) out instead of sending to far-removed, corrupted Wall Street? Because it’s never been a question for us to decide. It’s not in our job description. It’s in someone else’s, and we’ve got less than a week to find out who that someone else will be. Let’s hope he encourages the Senate to come up with something better.

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