Reacting to Obama’s Small Business Stimulus Package

Posted by: Stacy Perman on March 16, 2009

Last fall when the government passed what was then a $700 billion economic bailout package, largely intended to prop up failing institutions such as AIG and Citibank, one could hear the collective groan of small business owners across the country. Although they displayed a variety of reactions, most were perplexed by the idea that as self-sustaining entrepreneurs (already squeezed by the worsening credit crunch) they had to live and die by their own success or failure – while the government was going to take care of big businesses that had created the financial crisis to begin with.

President Obama seems to have been listening. Today, he announced a three pronged package intended to help small businesses. The program includes a $730 million chunk from the stimulus plan to reduce lending fees while increasing government guarantees on a portion of Small Business Administration loans up to 90%. It also seeks to increase bank liquidity by injecting $15 billion into banks in order to thaw the credit market and boost lending to small businesses.

In October, we spoke to a group of small business owners to get their reaction to the original bailout plan. Following the administration’s latest announcement targeted at small businesses, we reached out once again to get those owners’ take on Obama’s new plan.

Gina Schaefer, who is set to open her sixth Ace Hardware store in the Washington D.C. (area) says that while she thinks the speed at which the administration moved to do something signals that Obama does understand the important role that small businesses play in the American economy, she remains skeptical that it will spur the banks to make loans. “I don’t think it gives them more of an incentive then before,” she says. “It is always a guess as to whether a bank will take a chance on someone especially if they have no track record. The government says it is going to increase what they back and that is encouraging but it doesn’t mean you have a whole bunch of people that are seen as less risky to give to.”

Shaefer thinks however there is an upside if you are already in business. “If you have a track record and need an influx in cash this is definitely the kind of thing that will help – as long as businesses hear that message.

But I don’t think it is going to spearhead any kind of great revolution in this country for new business owners. The banks have traditionally been conservative and they are not going to hand out money any more freely because of this bill.”

Still she says that overall it is a positive move for the Obama Administration to make. “But if the banks weren’t in the predicament they are in they would increase their lending.” Of course Schaefer also notes that if the banks weren’t in the predicament they are in, the government might not have felt the need to hatch such a program in the first place.

Stay tuned we will continuously update reaction from small business owners.

Reader Comments

Michael Tarpinian

March 17, 2009 2:55 PM

Our problem is too much debt. The answer is not more debt. Another issue is that banks costs of lending is sky high. At current lending rates, they are losing money. The increase in FDIC insurance has cut projected profits of many small banks in half.

Cut business tax rates and personal income tax rates too. Make it possible for small business owners to realize a profit and grow their businesses.

http://allegrausa.blogspot.com/

Specter

March 17, 2009 3:14 PM

obama admits that 70% of the job creation over the past 10 years has been through small businesses. And yet his stimulus package uses 0.1% of its funds for small businesses. If he REALLY wants to help small businesses, give tax breaks, not tax hikes. Build nuclear power plants so energy costs go down. Instead he is starting a carbon tax and raising energy costs. I hope America can survive 4 years of obama.

Thomas Golding

March 17, 2009 3:15 PM

What would be helpful for manufacturing is a 100%, when bought, depreciation for new machinery, a global revamp of exchange rates that would level the playing field, and to make featherbedding in labor contracts illegal. And while we are making the cake it would be even better if we thew in universal health care to bring down the average costs per contributor and take the burden of the legacy of previous contracts off the backs of our industry. The backbone of our economy is industry. The cause of our crisis is that we have lost our backbone.

ted morgan

March 17, 2009 3:19 PM

Why would I be interested in putting capital at risk when Obama's raising my taxes. More risk less gain, no thank you.

Mike Wilson

March 17, 2009 4:15 PM

How do taxes and loans really help us create jobs in small business? What would my company do: take out a loan to hire someone?

I wish I could just pass a vote and have a couple trillion to play with that I can just leave office and forget about. This guy should try and run a business with his family on the line for a while.

More of one SMB owner's (me) thoughts and rants on this:

http://idea34.blogspot.com/2009/03/obama-is-reading-this-blog.html

Mike Wilson

March 17, 2009 4:16 PM

How do taxes and loans really help us create jobs in small business? What would my company do: take out a loan to hire someone?

I wish I could just pass a vote and have a couple trillion to play with that I can just leave office and forget about. This guy should try and run a business with his family on the line for a while.

More of one SMB owner's (me) thoughts and rants on this:

http://idea34.blogspot.com/2009/03/obama-is-reading-this-blog.html

Ned Brown

March 17, 2009 4:24 PM

I don't have problems borrowing - and I certainly am not interested in borrowing through the SBA - I'd like lower costs - specifically taxation - for my business and myself personally. Obama thinks I'm rich and thinks that I should pay more in taxes - I work twelve hours per day during the week and often on the weekends - I have no family - I'm paying for everyone else's families. The current economic environment doesn't encourage business owners to grow - it encourages business owners to quit.

frank colalella

March 17, 2009 4:47 PM

what good are loans if no one has money to buy any thing, or the things that people need are not affordable. the stimulus for small business should be for affordable health care,affordable mass transit,have a product that people need. but no one wants to spread the wealth

Susan Baxter

March 17, 2009 6:06 PM

This is great news for small business owners. We are not being left behind. How can I apply for the package?

Wil Beach

March 17, 2009 8:19 PM

It seems obvious that allocating .2% of more than a $1 trillion to guarantee loans to the small companies generating more than 70% of net job growth is political PR.

If anyone in Washington, Republican or Democrat, was interested in anything other than donations from interest groups, the proportions allocated to small versus large companies would be reversed.

Anyone interested can in the prospects for throwing money at ineffective/non-competitive businesses and banks need only look at the sad history of Japan and the socialist economies over the past 60 years.

Meanwhile, its business as usual in Washington as the growth engine (and major source of wealth for redistribution) is dying.

John Anastos

March 17, 2009 11:11 PM

I have a small business and I just can't see going into debt, borrowing money that I have to pay back would help get the country going again. If you don't have enough money to pay your bills now,borrowing more just put you further in the hole. No thanks if you can't make it now without going further into debt going further the hole just don't make sense.

Ted Nobhill

March 17, 2009 11:43 PM

This is good for small business, but i have been looking for info on the Stimulus Package, and have only one site that is ok, not great but ok,
http://americanrecoveryandreinvestact.com/

mary Jackson

March 17, 2009 11:55 PM

The growth of this economy is dependent upon small business yet we get no relief. We manage our businesses and don't take bonus or pay when business is difficult; we manage based on budgets and expenses and yet the rewards and incentives go to poor business managers. Reduce the taxes on small business, many of us are taxed at our own personal tax rates so corporate tax reductions for C-corps don't help. In addition we pay taxes upon taxes but if a small business goes away ...our numbers don't even reflect in the unemployment column because in most cases very small business owners don't qualify for unemployment. IT is Tax relief we need and we need it NOW!

mary Jackson

March 17, 2009 11:55 PM

The growth of this economy is depenent upon small business yet we get no relief. We manage our businesses and don't take bonus or pay when business is difficult; we manage based on budgets and expenses and yet the rewards and incentives go to poor business managers. Reduce the taxes on small business, many of us are taxed at our own personal tax rates so corporate tax reductions for C-corps don't help. In addition we pay taxes upon taxes but if a small business goes away ...our numbers don't even reflect in the unemployment column because in most cases very small business owners don't qualify for unemployment. IT is Tax relief we need and we need it NOW!

Marty Genei

March 18, 2009 7:33 AM

The stimulus has and will do nothing for the small business. Help in our case would be a tax rebate on losses from the past 5 to 6 years. Permanent tax relief. Same year depreciation on equipment and faster deprecation on buildings.
Due to all the new taxes,regulations and higher energy costs coming from the Fed Govt. I choose to hold not bet on the next 4 years.
The Risk no longer equals Reward and I will not invest more resources to just employ workers.

Bill Miller

March 18, 2009 7:47 AM

Looks to me like they are throwing more money at the banks. In my eyes if a bank is "too big to fail" it's too big to exsist.
Break up the banks, re-write the anti-trust laws, and let's start over like we did to end the great depresion.

Or here's another idea, every American over 18 years of age, that can prove his/her citizenship gets 1 million dollars. Do the math, the Gov would save trillions.
This is what would spur the economy, people would pay off debt, save for chilrens college, start that small business they were afraid to, build that dream house, buy that new car. Contractors and car-makers would thrive. Home improvement stores too.
Yes, there are those who would handle the money poorly, alcohol, hookers, gambling, drugs, but hey, that would just thin the herd right?

This President does not impress me, other than with the skill and speed at which he is displaying, flushing the average Americans' dreams down the toilet seemingly while we sleep.

Joan Benson

March 18, 2009 8:44 AM

I sent over 100 letters to Washington, without a response. I suggested a freeze on all business loans and small business mortgages. Delinquent payments put on the back of the loan, and a no interest loan easily available to small business owners who have been hurt by the economy.

Joan Benson

March 18, 2009 8:44 AM

I sent over 100 letters to Washington, without a response. I suggested a freeze on all business loans and small business mortgages. Delinquent payments put on the back of the loan, and a no interest loan easily available to small business owners who have been hurt by the economy.

Down and drowning in the East

March 18, 2009 9:37 AM

I run a small house cleaning service. My question is what is his plan to help businesses like mine where my clients can no longer afford my service and I can't lower my prices anymore to make it worth my while. Feeling right now that my only choices are to quit or work under the table and without insurance to cover any thing or anybody.
But then I will still struggle to purchase a home because the lack of proof of income. So then I would be stuck working some other crappy job 50-70 hrs a week to show the ability. WTF

RM Davis

March 18, 2009 12:20 PM

What about Workers Comp? It is killing me to run an honest company while others just give their "employees" a 1099 at the end of the year. I don't mind paying my fair share but everyone else should too.

Neal Gordon

March 18, 2009 12:58 PM

The President and the Administration should be applauded for recognizing and understanding the need for the loan programs under the SBA (Small Business Administration). However, the real success of all of their programs and proposed changes will be based on the details and so many of those details are still unclear. I will remain hopeful.

Unfortunately there could be a major problem with the $35,000 Business Stabilization Program that was part of the American Recovery act. The wording of the act EXCLUDES any borrower who obtained an SBA 7a loan prior to the signing of that act on 2/17/09.

Whether this was an oversight or intentional, this wording leaves out the over 100,000 small businesses that have this type of loan, might currently be struggling and should have been the intended group for this program.

For those interested in reading it, we have posted that portion of the act on our website www.businessborrowersalliance.org

Neal Gordon
Business Borrowers Alliance
ngordon@businessborrowersalliance.org

Julie Wiggins

March 18, 2009 1:49 PM

Where does it leave small businesses who were denied small business loans? I have banks telling me I have too much outstanding credit and not enough cash incoming because they don't understand how small businesses work, creditors don't understand how S Corporations work, all I wanted was a small business loan to refinance my debt.

The economic stimulus should be more than just giving banks money to possibly give small business loans, its still the discretion of the bank to loan the money to a small business. It should be giving money to small business without strings attached. If I could pay off my business debt, I could afford to hire my two ex-employees back.

What about us? I'd love to have a bonus of 1 million dollars.

Shannon

March 18, 2009 5:52 PM

I opened a gelato shop here in So Cal. two years ago. I was sure my location was perfect because the area was planning on new homes and businesses. Now the economy went to crap, so did the plans for building. I would love to re-locate but my bank wont help me out with a loan. Am I SOL?

The Mad Hedge Fund Trader, San Francisco, CA

March 20, 2009 2:45 PM

Looks like we are going to have to invent ourselves out of this mess. One third of US GDP is produced by companies that were created after 1980. Almost all new jobs are created in firms that are less than five years old. These figures show that innovation is the primary driver of new hiring.
www.madhedgefundtrader.com

Pauline Helen Russell

March 20, 2009 3:58 PM

This is great news for small business owners. We are not being left behind. How can I apply for the package?

Tiffany Inspired

March 20, 2009 5:02 PM

With today's recession, even if I have a small business, I won't take the risk of having a loan from the stimulus package. Another interest would pile up and who will suffer? it is us the business owner itself, right? How could we do business, when everyone else are falling into crap?

I am not against Obama, but for a small business owner like us, I guess it would not really help in the long run.


Tiffany Inspired

Bill Horin

March 21, 2009 10:49 AM

I am a small business owner and I agree with many of the comments that say a loan is not the answer. Many of my clients are also small business owners who can't afford my services anymore. Some still owe me money from months ago. I have access to credit but I've spent the last 5 years avoiding more debt. It's a 'Catch 22'.

Until big business becomes responsible for its debts like small business owners have to be, there will be no progress.

Belle

March 21, 2009 9:57 PM

Any person with an economics background would know that our market is a circle, with specific links. The household is the most important link, next to businesses. If we, the consumers, do not have money to spend or simply won't spend(due to unemployment, high prices), then no amount of money given to businesses to help them make products will help. You can help businesses produce more, but who will buy the products? This administration is not targeting the problem. Cut taxes, put more money into the consumers pockets, they will start buying again (consumers SPEND 80% of their income and save %20), which in turn will create a demand for more products. Once businesses thrive and can't keep up, they will hire more people, which will put yet more money into the consumer's pockets. Our economy will be fixed. We need buyers, we need sellers. That's the way it goes.

Maria Lorna Kunnath

March 21, 2009 10:04 PM

How will the Stimulus Package for small business work for a business (started 2003) which earned profit only in years 2005-2008 but had zero profit in 2003,2004 and 2008? Is a bank loan possible, if yes which banks will likely to approve? Cash flow is my main issue.

H B

March 22, 2009 12:11 PM

We built a storage facility that opened about a year ago. My husband busted his heiny getting units filled up and we are now over 80% occupancy.
At the end of construction phase we applied for permanent loans and no one called us back. We wanted to consolidate all of our loans to one jumbo loan.
As the economic crisis unfolded the "bank" we dealt with stopped financing cost overages. When we had overages we had to pay out of pocket for approximately 90% while the bank threw in 10%. We ended up with 6 months to fill up the facility and ran out of cash. Now we are behind on our loan.
Our bank won't loan for a permanent loan but will extend the original loan with a balloon payment at the end of a year if we pay the $50,000 we are behind.
The bank says they will not put this on the back of the loan (Which we could pay) but we have about 10 days or they will foreclose.
We are going to lose our multi million dollar busines/property investment over not being able to get a loan.
We have equity and the ability to pay the loan.
We don't want a hand out. We want a loan.

Alvita Carey

March 23, 2009 12:38 PM

I agree with Bill Miller, his statement makes a lot on sense. He said give each person over 18 a million bucks. It will never happen but even if each house of lower income families got a million bucks just think what that would do for this economy and my small business. It makes more sense then borrowing more money that I can't pay back.

mike

March 26, 2009 12:04 AM

how about this stop income tax for 6 months or a year the small business owner dosn't have to match the employee dosn't have to pay more money to spend for everyone ,and then since our fearless IRS leader can have so many back taxes why not just forgive or erase any back taxes owed so we can start fresh . and quit giving to people that want food stamps and welfare . so they can work very min um hours .and use money they make to buy season passes to fun parks . while we work our but to pay for all of it .

Kim

May 6, 2009 6:43 PM

I am a small business trucking owner. I am looking for money to help the business grow. How can I apply for the stimulus package? I visited usagovgrants.com. I really don't know of any other sites but at the end of this site I had to pay for S&H. Is it worth it?

David

May 13, 2009 1:51 PM

This stimulus money is a farce, the money will never be made available to small businesses as intended, I have tried to get funding for my business through this program for 3 months now, but the SBA will flat tell you that they don’t know how to implement the program and it is likely that the money will never be made available, so it will just be sent into the general fund.

Tyre Warren

May 17, 2009 7:23 PM

I think that small businesses sholud be able to get a stimulus package to help pay off bills and to keep their doors open and jobs for people. I own my business and had to get loans to make it through this tough time and i never have had to do it in the past ten years. So if we could get help that would be nice, but i never see that happening in the future.

Mitanni Spruill

June 16, 2009 9:54 PM

I'm happy about the stimulus package for small entreprenuers...It's better than nothing:-) Go to small business administration website to apply. Im a real estate broker in the Tennessee area, if you're interested in cheap land, residential or commercial visit www.SIGmemphis.com

Ginger Balazs

August 24, 2009 4:39 PM

we have been opened for 10 months and are doing realy good its just hard doing it all by your self with no loan or grants. i was just wondering is there any tax relief or grants for small business, we have a small restraunt.

Yancy Green

September 15, 2009 9:46 AM

After reading through the comments I agree with most. All of us know as small to medium business's the cost of operation and making sure we keep a cushion in the bank for slower times. We all have a peak season and a slow season and personally I love the recession because it weeds out the crap and poorly managed business's. I have only been an owner for 4yrs and my biggest complaint is raising minimum wage, THE WHOLE POINT IS IT'S MINIMUM! I think the higher it goes the more hours we work, as everything around us goes up bills bills bills.... It only makes it harder to make a profit and want to be in business. I have seen it 3 times this year where an owner in my town closes there business to go into the work force because they just don't make enough to put in 65 to 80hrs a week.
An for all you business owners, drop your pride and seek help from an industry expert and don't be afraid to shake your business up! Your customers won't leave they love you and your business and will stick with you during changes.

JOHN FULLER

November 3, 2009 3:26 PM

The whole thing is a JOKE. I own a small business and after years in business have seen my credit lines cut off one after another. Now left no way to pay suppliers, I am going to fail. It has caused me to fall behind in personal and business credit obligations and so even if money was available again, I would never qualify. That's our GOVERNMENT for you. Slow, unless it is for their buddies they owe favors to in the BIG CORPORATIONS!

Alissa Hyder

November 16, 2009 12:47 PM

I understand there are quite a few businesses that rely on credit on a regular basis so for them this could be good but not for us. The only times we use our line of credit is when we have no money left over after paying all the taxes! We work hard for 12-18 hours a day and when it starts to pay off we are forced to hand over a heavy chuck of it to a government that is increasingly corrupt and greedy. When profits are not look'n good they give us incentives to go in debt? Or is this an incentive for the banks to help us go in debt? This is further proof that Obama's focus is not where is should be...on the big banks and not on the backbone of this country. Looks like a wolf in sheeps clothing to me.

william crawford

November 25, 2009 3:15 PM

I lost my job of 5 years 12-24-08 and by
5-1-09 every thing i worked for was gone
i need help please

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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