As the debate about the now-stalled government bailout continues, supporters continue to argue the plan is critical to the health of small business in this country. So what’s actually in the package for small companies? Very little.
Certainly the legislation, if it can be salvaged, may help free up the credit markets, improving the odds of success for small companies looking to borrow from a bank. And small banks do get some help in the bill in the form of a more favorable tax treatment of the losses they took from holding stock in the housing giants Fannie Mae and Freddie Mac. But when it comes to broad steps to improve the flow of credit to, or health of, America’s small companies, there is nothing significant in the bill to get excited about.
Jere Glover, executive director of the non-profit Small Business Technology Council and former chief counsel for the Office of Advocacy at the Small Business Administration, argues that is a real problem. Glover puts it this way:
When Wall Street gets a cold, small business gets terminal pneumonia. We hear all the politicians say small business is the engine that drives the economy. Somebody has to focus on that issue and make sure that credit is available to keep existing firms in business and to grow the new firms. I'm concerned that the small business lending crunch will become a crisis very quickly.
So what does Glover propose? He contends the SBA should take steps to jumpstart the pace of SBA-backed loan originations, in particular by waiving fees on those 7(a) loans. And he says a special discount window should be established at the Federal Reserve specifically to provide liquidity to banks for small business lending. Glover says such a move was proposed during the Clinton years but never enacted.
With the Dow plummeting and widespread concern about the health of the nation's financial system growing, Glover's prediction of a crunch becoming a crisis becomes more likely. Hopefully some of the future debate will focus on small business--and not just on Wall Street.