Sen. John Kerry, Chairman of the Senate Committee on Small Business and Entrepreneurship, Ranking Member Sen. Olympia Snowe and Sen. Charles Schumer seem to be the only three legislators in
Small Business owners get little attention from Congress because they don’t tend to vote as a block, instead voting their individual pocketbooks. Lobbying organizations like the National Federation of Independent Businesses (NFIB) have a solid agenda and base of members, but unless more business owners in the
It is sad really that our congressional leaders and the Bush administration have ignored small businesses. They know the facts. They know that small businesses employ more people in the
What angers me most is how the Small Business Administration has not done during the last two months to help small businesses who have existing SBA loans or to design effective ways to push banks making SBA loans into making more of them. One month ago, I spoke with Eric Zarnikow, Head of the SBA office of Capital Access to learn how the SBA was going play a part in helping small businesses gain access to necessary capital. On the telephone line with us was someone from the SBA national press office. About half way through the 30 minute interview, the press representative made a joke that she and my interviewee were going to be laid off on January 20, 2008. I understood her remark was an attempt at levity, but all I heard was as the SBA was in lame duck mode and that all the decision makers at the SBA were essentially sitting back until the Obama administration takes over and they leave their posts.
Among other things that the Zarnikow told me was that there essentially wasn’t a problem with delinquent SBA loans and therefore nothing would be done on a wide scale basis to help businesses that were having trouble making their SBA loan payments. He quoted a statistic that 97% of all SBA loans were not delinquent. He also acknowledged that loan demand was significantly down for FYE 2007 vs 2006, but attributed it to businesses not needing capital or choosing to wait to borrow money until things got better. Having spent many years working in and with banks, I can explain why his statistic is grossly under represented.
In the real world, a potential borrower may call or go into a bank to inquire about a loan. If the loan officer essentially tells the potential borrower that their bank isn’t really making loans right now, then the prospective loan applicant leaves the bank without ever being recorded as a loan that wasn’t made. After several tries the borrower gives up. This scenario is happening in a great majority of banks today. Since the loan was never actually applied for and turned down, there is no statistic maintained to give the SBA.
What really incensed me about my conversation with the Zarnikow that he repeatedly said that if current SBA borrowers were behind on making their loan payments, then maybe it would be a prudent measure on the part of the originating bank to liquidate the loan (i.e. foreclose on the assets) rather than risk loosing whatever collateral was left in the business. This attitude comes straight from traditional bank mentality. If these were ordinary times, I might agree with him, but these aren’t ordinary times. I wonder if he feels that General Motors or Ford should be liquidated too and that creditors should fight over the carcasses of the dead companies. While I am not a proponent of government bailouts in general, this is a time when the risk of loosing several million direct and indirect jobs as a result of say General Motor’s collapse, I would argue that across America there may be far more small business jobs lost than that if the new administration doesn’t hit the ground with a plan specifically directed to helping small businesses.
The only real hope for small businesses is that the incoming administration sees this issue differently and understands that a work-out process will benefit the economy more then the current SBA’s liquidation philosophy. Unfortunately, we will have to wait until the third week in January to find out.
Sam Thacker is a partner in Austin Texas based Business Finance Solutions.
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