Jobs Act to aid access to capital

October 8, 2010
| By Pete Daly |
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As a member of the Senate Finance Committee and major proponent of the Small Business Jobs Act signed into law Sept. 27, Sen. Debbie Stabenow, D-Michigan, says the new bill will address what is probably the No. 1 complaint she hears now from small business: too little access to capital.

A study by the National Federation of Independent Business found that 45 percent of small business owners were not able to access the credit they needed to grow their company, according to Stabenow.

The new bill attacks the scarcity of credit in three major ways, but Stabenow conceded at a gathering last week at the MI-Small Business & Technology Development Center at Grand Valley State University that the impact of the legislation won’t happen soon enough — perhaps not until 2011.

The small business community, she said, has asked repeatedly why the big banks were bailed out but there still is too little lending being done.

“We’ve been saying ‘lend’ and the (bank) regulators are saying ‘don’t lend,’” she said.

Stabenow said she and others in Washington have sent a message to the bank regulators “to use a little common sense here.”

And they also fought for passage of the Small Business Jobs Act, which Stabenow said is “fully paid for.”

In addition to increasing access to capital, the SBJA will also cut taxes for small businesses and help small companies sell their products overseas, according to Stabenow.

A key part of the bill is the establishment of a Small Business Lending Fund, $30 billion set aside for use in partnering with community banks to increase small business lending. SBJA supporters say the fund will generate a total pool estimated at $300 billion, for loans that will be available to America's small businesses.

“Only healthy community banks are eligible to participate, and the borrowed money must be repaid with interest. There are also stiff penalties for banks that use the fund but do not increase small business lending,” according to an explanation of the bill handed out by Stabenow’s staff.

The bill includes a State Small Business Credit Initiative, in the form of $1.5 billion, to increase small business lending through already-successful state programs that help reduce risk for lenders who make loans to small businesses. Stabenow said the Credit Initiative was modeled after the successful Michigan Collateral Support Program, run by the MEDC, which helps small businesses whose collateral has dropped in value.

A key factor in the overall credit crunch facing business is the drop in commercial/industrial real estate values and the drop in value of business equipment, causing many banks to call in loans that were originally based on collateral that sank in value during the height of the recession.

The bill increases Small Business Administration loan limits, increases access to SBA loans, extends SBA provisions originally included in the Recovery Act of 2009, and directs the SBA to create a clearinghouse to help small businesses find lenders in their communities. This loan program has supported more than $26 billion in small business lending, creating or saving more than 650,000 jobs nationwide, according to Stabenow.

The SBJA includes an estimated $12 billion in tax cuts for small businesses, according to Stabenow. These new programs include extending the bonus depreciation, a double tax deduction for start-ups, increased Section 179 expensing, and a 100 percent exclusion of small business capital gains. Generally, non-corporate taxpayers may exclude 50 percent of the gain from the sale of certain small business stock acquired at original issue and held for more than five years. The new bill increases that exclusion to 100 percent of the gain from the sale of qualifying small business stocks.

All the tax cuts start this year, said Stabenow, urging all small businesses to talk to their accountants right away because Washington, she said, is doing “everything we can to try to jump start the economy right now.”

Stabenow noted that she serves on President Obama’s private sector export council, which comprises five senators and five members of the House.

“Our goal is to double exports in the next five years,” she said, adding, “There are opportunities now for us in the global economy to export.”

She said that 45 percent of large companies export products overseas, but only 1 percent of small businesses do. The SBJA outlines a new effort for the U.S. Trade Representative agency to increase access to markets and enforce our trade agreements, specifically to help small businesses export products, according to Stabenow.

A recent report on the trade barriers other countries use to keep American products out was more than 500 pages long, so the new bill would give new tools to the Department of Commerce to provide expert advice to small business owners who want to sell their products in foreign markets.

The bill improves the Small Business Administration's trade and export finance programs and elevates the Office of International Trade within the agency. It also establishes the State Export Promotion Grant Program to increase the number of small businesses that export.

The SBJA also addresses the desire of small business entrepreneurs to win government contracts, in the face of government red tape and loopholes that too often give large multinational companies preferences in government contracting. The Small Business Contracting Revitalization Act sponsored by Stabenow is aimed at cutting the red tape and closing the loopholes.

Stabenow indicated that increasing government contracts to small businesses by just 1 percent could create more than 100,000 jobs.

Stabenow field a few questions from the audience that reflected the small business owner’s fear of government red tape and the occasional failure of legislation to deliver what was promised at the outset.

Richard Ortega, founder of Alternative Mechanical, a certified minority contractor, said he had a small amount of apprehension regarding political parties “wrestling” in Congress, with end results that might prevent the SBJA from helping small business as much as it is supposed to.

Sometimes, Ortega said, changes to legislation “tie your shoes together before you can start the race.”

“We worked very hard for that not to be the case,” replied Stabenow. She said if there are “any glitches” in actual implementation of the bill, she wants to know about it, repeating her claim that bank regulators have been asked not to impede community banks that want to make small business loans under the SBJA.

David McMorrow, vice president of TriStar Molding Inc. in southwest Michigan, said the recession caused a drop in its orders that caused employment to go from 31 people to 19, “overnight.” McMorrow said his company was interested in federal contracts and had considered partnering with a minority-owned business to facilitate that, but there were “too many obstacles” to setting up an effective partnership.

“I would hope the federal agencies would take us seriously,” said McMorrow, citing the difficulties, in general, of competing on the open market with Chinese manufacturers.

Sandy Bloom, executive director of the Economic Development Foundation in Grand Rapids, one of several nonprofit Certified Development Companies in Michigan which serve as intermediaries between the banks and small businesses seeking SBA 504 loans, said she hoped the improved access to credit is “implemented quickly,” because she hears “every day” from small businesses that have loans “ballooning right now.” Bloom said she had heard the credit legislation might not be in place until 2011.

Brian Picarazzi, senior area manager of the U.S. Small Business Administration in Grand Rapids, said he had heard implementation was a couple of months away.

Stabenow also spoke about the latest health care reform legislation pertaining to small businesses, although she noted that it doesn’t fully kick-in for three more years.

Also speaking with Stabenow and Picarazzi was Carol Lopucki, state director of the Michigan Network of Small Business and Technology Development Centers, which hosted the forum on Grand Valley State University’s Pew Campus.

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