• WisBusiness

Wednesday, December 23, 2009

Bring back the punchbowl for small business


By Jeff Hoffman
Argue all you want about the true effectiveness of the $787 billion American Reinvestment and Recovery Act; however there is one program that has helped small business get back on its feet.

Unfortunately, just as small business is starting to see the light at the end of this very dark economic tunnel the available funding of $375 million for SBA stimulus loans was exhausted as of Nov. 23.

There are two critical items that have made the SBA stimulus loan a very effective tool for borrowers:

1.) The upfront fees (which can total approximately 3 percent of the loan) were waived

2.) The government guarantee for lenders was upped from 75 percent to 90 percent of the loan. This additional security for lenders led to the ability to get deals done in what has become an extremely conservative conventional lending market.

As of Dec. 8 there were 679 requests for the SBA stimulus loans totaling $313.4 million dollars that have been put on hold until Congress decides whether or not to act on this issue.

U.S. Sens. Olympia Snowe, R-Maine, and Mary Landrieu, D-La., have just introduced a bipartisan bill that would call for the extension of the SBA package until Dec. 31 of 2010 and also increase the maximum loan size of the SBA 7(a) from $2 million to $5 million and the SBA 504 loan from $1.5 million to $5.5 million.

With health care commanding the full attention of the Senate right now it is unlikely that this issue will receive much attention in the immediate future and this piece of legislation will most likely be included in some type of jobs bill (Stimulus Part II) being considered for 2010.

Meanwhile many small businesses that finally have the confidence to move forward with expansion have one of the proven successful "stimulants" removed from the economic recovery. According to the SBA, the average weekly loan volume prior to the expiration was up 60 percent from the weeks preceding the passage of the Stimulus package.

I have seen first hand the effectiveness of this program via a start up business by the name of Innovation Station.

Innovation Station was in the middle of purchasing a facility for their new daycare business in Brookfield and then September 2008 hit the financial world and Innovation Station was no longer qualified for a loan. Innovation Station went to five separate banks over the course of five months to try to salvage their dream and finally found a lender that got them approved via the SBA stimulus program. After being open for only four months Innovation Station is exceeding their financial projections and they are up to three employees. While it does appear that we are emerging from the Great Recession the private sector, especially small business, needs to start growing again to sustain a healthy economic recovery.

With the increased lending standards that entrepreneurs face and the difficulty in obtaining capital, the extension and expansion of the SBA stimulus funds are an appropriate measure for growth that Congress should act upon immediately.

If our elected representatives truly want "JOBS! JOBS! JOBS!" this program should be brought back "NOW! NOW! NOW!". Please consider contacting Senators Kohl and Feingold and let them know to keep money flowing to small business.

-- Hoffman is president of the Independent Business Association of Wisconsin and vice president at Judson & Associates, s.c.

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