On January 6, 2009, the National Small Business Association (NSBA) issued a list of small business initiatives it would like to see congress pass this year.
Among the proposals outlined were:
- Expand SBA lending by eliminating many high fees such as lone guarantee fees and origination fees that borrowers now pay. They would also like to see the SBA increase their loan guarantee on 7(a) and 504 loans. This would be welcome for borrowers because fees associated with SBA loans can be very high, depending on the lender.
- Require banks participating in any future government bailout program funds (TARP) to lend at least 25 pecent of the received funds to small businesses.
- Allocate $3 billion of the existing TARP funds to purchase securitized 7(a) loans, thus freeing up the secondary market for these pooled securities. This is a fairly complex behind-the-scenes measure, but many banks that originate SBA 7(a) loans sell off the guaranteed portion of the loan to free up the cash to make it available for more 7(a) loans. This secondary market is important to the overall functioning of the SBA 7(a) loan program. Since the confidence in securitized loan portfolios eroded after all the losses in the sub-prime residential mortgage industry, the secondary market for selling off pooled SBA loans has nearly dried up, and this creates a liquidity problem for larger SBA lenders. Some banks like Wells Fargo should be applauded for keeping their own loans and not selling them into the secondary market. (I have written numerous pieces about how borrowers are hurt by having their loan sold. When the loan is sold, the borrower no longer has the same relationship with their lender, making servicing difficult.)
- Asking congress to set aside 25 percent of any new infrastructure stimulus funds President Elect Barack Obama is proposing for small businesses. This legislation has not been introduced as of this writing, but is a key component of the new administration’s recovery plan.
- Eliminating the self employment tax on health care insurance.
- Making small-business-friendly changes to the tax code.
- Giving as many as 21 million small business owners access to more affordable health care.
- Modifying net operating loss carry-forward rules to benefit companies with losses in 2007, 2008, and 2009.
It is very doubtful that all of these initiatives will be worked into law, but all of them deserve congressional consideration as they all focus much-needed attention on the plight of the small business owner.
Sam Thacker is a partner in Austin Texas based Business Finance Solutions.
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