Often when politicians try to “help” business owners they are just shilling for future votes. I expect today’s announcement of a “small business bail out” to be no different.
While there are many reasons today’s announcement will have little impact on Main street, here are three off the top of my head. I expect the political rhetoric from Mark Warner, (D- Virginia), Christopher Dodd (D-Connecticut) and The White House today will likely have very little impact on small business owners in search of working capital or business loans.
First, The White House will raise the limits on government-backed small business loans, so what? While that may sound appealing to the few politicians that understand its impact, it does not focus on the real problem. It’s not the lending caps, it is the qualification for loans and tight credit environment.
Also, what about the Treasury’s March announcement of a $15 billion program to purchase pools of SBA loans. This will really help, but so far has not been implemented.
Secondly, there are plans to “re-emphasize” community bank access to the TARP. Only in politics does “re-emphasizing” count as policy change or anything substantive.
Community banks do not want to access TARP funds, because they are prohibited from charging any fees on the lending they make. Other than our government, an enterprise can not survive without charging reasonable fees for the services it provides.
Finally, there is a current requirement that anyone participating in TARP sell warrants to the government giving the U.S. the right to purchase common stock at a set price. Would you accept government money if you had to give Uncle Sam the option to buy part of your business?
These are my thoughts, do you think this is it rhetoric or real change we can believe in?
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