It’s easy to get lost in acronyms and Washington-speak as American small businesses continue being used by pundits on both sides of the aisle as symbols of the financial crisis’ impact on Main Street.
The federal government has moved to jumpstart lending through its new TALF, which is the ugly acronym for Term Asset-Backed Securities Loan Facility. The idea is to help finance asset-backed security purchases which will give front-line lenders more enthusiasm to loosen their purse strings.
The $1 trillion in new credit was originally only for securities tied to consumer and small-business loans but has been goosed to include heavy industrial equipment, agricultural-equipment leases and rental-car fleets.
While this plan is ambitious and the trickle down effect potentially lucrative, the reality is that small business is often left to help itself.
“I believe the stimulus plan will generally help small business only because I think the plan will generally help the economy,” said Mark Sunshine, president of First Capital, a middle-market lender to businesses. “In addition, we should see payroll tax cuts in the next few weeks. That will be helpful. It will only be a small amount each week but will likely be spent at a small business; such as the dry cleaner.”
To cut the chase, I thought it would be interesting to pick three little things that would make a huge difference to America’s small businesses.
• Firm up the SBA: A piece of the stimulus bill is supposed to help small business with SBA loans, but Sunshine calls the agency “almost irrelevant to small businesses.” The Obama administration, he says, has to focus on making the SBA into a real organization. “One way is to lift the SBA loan limits so as to help small businesses as opposed to mom and pop,” Sunshine says.
He and other say the federal government could encourage tax rules that would make it more cost-effective for private pools of capital could lend to small businesses. “If you were to form a partnership to lend to small businesses, you wouldn’t be able to bring in money from not for profits; pension funds, insurance firms or foreign investors due to antiquated tax rules,” he says.
• Work on Cutting Costs of Employees: “Small business owners are finding it’s very costly to employ people,” says Ron Schinik, managing partner of CrownBrook Capital, an investment group that helps small businesses grow through acquisition. “Health care, the employer cost of FICA, workers compensation, etc. Companies are trying to cut fixed costs as much as possible and are trying to renegotiate these expenses so that the cash outlay on a monthly basis is reduced.”
• Give Small Business a Voice in Washington: If it did, Schinik said, “maybe the government would expedite depreciation on large ticket items without a cap; alleviate the FICA expense on employers and have some national plan for workers comp which has become a disproportionate share for the employer on a month to month basis.”