What would have happened if we bailed out only the banks and big corporations that didn’t need it? How dumb would that have been? That’s exactly what we’re doing with small businesses.
I’ve been working to get the politicians, the SBA, and the banks to work to support small businesses and live up to the expectations they’ve been putting out there for that support. Media is beginning to take notice. Fox Business Channel may have us on live in the next few weeks, and CNNMoney.com published an article using some of our info today.
The article was too short to say much. Following is more if indeed you even want more.
My position is that I don’t feel the government owes large or small business a handout or even a hand up.
My problem is that once again the politicians and the SBA have made claims about giving a hand up to small business that isn’t living up to any of the hype. Politicians have a bad habit of wanting to get their pictures taken with small business people to pretend that they are providing something commensurate to the help they give large businesses. Again, I don’t care if they help or not, but I do care deeply when they claim something that is not true and further their political careers with empty photo ops at the expense of small businesses. They are clearly not looking out for small businesses on either side of the aisle.
In February, Congress approved a new type of loan for small business called the ARC Loan, which, from outward appearances, appeared to actually be the first loan the SBA and the politicians have ever put out that was focused solely on true small businesses (under 20 employees, which is still 80% of all businesses in America.)
The director of the SBA, Karen Mills, was quoted as saying the ARC loan is for “immediate relief” for small businesses who could pay off “home equity loans and credit cards” used for business purposes. At no other time has the SBA recognized that, good or bad, this is the primary way most true small businesses fund at least part of their startup.
But banks are simply not allowing this loan to be used for this very purpose for which it was designed. And the banks have put so many further restrictions on getting this loan that it is actually easier to get a conventional loan than it is to get this ARC loan.
The restrictions have kept the applications so low that nine months after this loan program was conceived, only 20% of it has been distributed while hundreds of billions were distributed to high risk banks in a few days with no paperwork! But the real travesty is this:
Distressed small businesses can forget it – As a result of the changes the banks have made to the ARC loan requirements, almost no distressed small business can qualify. Most of these loans are going to very healthy businesses who would make it through the recession just fine without the ARC loan. This program, which was designed for “immediate relief” is being issued to healthy companies who don’t need it, and the SBA and the politicians are saying they’re helping distressed small businesses.
If you are lucky enough to have a conventional business loan with your own bank (most true small businesses don’t have these), they will allow you to apply. And if you get accepted, they will take $35,000 from their left pocket (the ARC loan) and put it in their own right pocket (applying it against your other loan with them). This simply reduces their at-risk loans. Paying off home equity loans and credit cards, the principle purpose of this loan program is simply out of the question.
I’m one of those businesses that don’t need the loan. I applied for one of these just to see what the experience is like since I recommended to so many others that they should do it before it was obvious it was so flawed. We don’t owe any money to our bank, Wells Fargo, so we will likely get rejected, but I needed to see if all the objections were real. They are- our initial submission was 301 pages. I’m sure they’ll want much more before we’re told we don’t qualify. Oh, by the way, the bank has already told us that with our good credit and low debt, we already qualify for their conventional business loans, which are much higher risk for them and should have a much higher qualification threshold. Hmm… seems upside down, doesn’t it?
The stimulus was $787 billion dollars. This ARC program is $255 million, or three-tenths of one percent of the entire bailout. Small business is 50% of the gross domestic product but get’s three-tenths of the bailout? The big businesses were given hundreds of billions of dollars in just a few weeks when not a single one of them would have been able to qualify for the $35,000 ARC loan. But nine months later, only 20% of the meager $255 million has been distributed, and that only for the purpose of banks taking money from their left pocket and putting it back in their right pocket.
Meanwhile the SBA and the politicians on both sides of the aisle continue to pat themselves on the back for another empty photo op with small businesses. Again, I don’t care if they help small biz or not – I’m not a victim in need of handouts. But don’t pretend to be helping when you’re actually just using the small business owner to promote your own careers with empty promises.
Continuing (almost daily) attempts to reach politicians and the SBA to get them to either fix this or stop pretending they are helping fall on deaf ears. They’re all too busy patting themselves on the back for once again giving the appearance they’ve been helpful to small business.
What would have happened if we had only given support to the banks and big corporations who didn’t need it? Sounds irrational, but that’s exactly what’s going on with “assistance” to small businesses.