Smart Borrower Blog

Small Business Loans are Needed to Drive the U.S. Economy


Feb 1st, 2010 @ 8:50 AM by Debbie Dragon


Small businesses could play a major role in the recovery of our fallen economy, that is if they can get the funding they need to operate and expand. Small businesses tend to hire new employees, provide new ideas and often develop into large companies that are a force within the business world.

The issue at hand is that so far small business lending has not been happening. While government officials, banks and economic experts all seem to agree that more funding needs to be available for small businesses, no one as of yet has come up with a funding solution that has worked. The government wants the banks to loan the money, but most simply won’t claiming they don’t have the funds and it is too risky.

Obama has tried many initiatives, held summits and encouraged bankers to take a second look at small business loan applications. “There are businesses that are looking for loans out there, that are profitable and ready to make money, and the key is to match them up with banks that are in a position to lend,” he said.

The problem for banks is finding the right businesses to invest in. While small successful businesses can drive the economy, more will fail that survive. The Small Business Association (SBA) statistics even show that 56 percent of startup businesses fail within their first four years of being in business.

There is however, a glimmer of hope for small business looking for loans. A new initiative could help. Obama plans to lend small banks $30 billion. Incentives will be attached to the loans if the banks use the money to fund small business loans. The money would come from leftover Troubled Asset Relief Program funds. Banks with assets less than $1 billion would qualify for loans in amounts equal to 5 percent of their assets and banks between $ 1 billion and $10 billion would qualify for loans equal to 3 percent of their assets.

Throughout the country there are more than 7,500 banking institutes that would qualify for the funding and the hope is that the loans would help to jump start the economy. When will the funding be available? As with so many other economic recovery programs, that is uncertain. The funding may need Congress approval, so there is really no telling. For small business owners, the sooner the better.

About Debbie Dragon
Debbie Dragon is a full time freelance writer and the co-owner of ReliableWriters.com.

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