The message from President Obama is clear: We must give small businesses the tools they need to create the jobs America needs.
Small businesses are the biggest engine for job creation, having created nearly 65 percent of the net new jobs over the last 15 years. However, in this tough economic climate, small businesses still face tightened credit and other obstacles that have hurt their ability to grow. Solving these problems is a central piece of President Obama’s Jobs Plan.
First, small businesses need tax incentives to create new jobs quickly. That’s why the President proposed a temporary tax credit of $5,000 per new hire and additional reimbursements for wage increases for more than a million small businesses. The credit will be put in their hands not just at tax time but every quarter, encouraging them to make those hires now. He has also called for eliminating capital gains taxes on small business investments and providing other tax incentives.
Second, we should offer smaller banks the additional capital they need to expand small business lending. To do that, the President proposed a $30 billion Small Business Lending Fund designed to provide incentives for community and smaller banks to increase their lending to creditworthy small businesses. These local banks already make more than half of loans to small businesses across the country.
As proposed, this fund will be structured in a smart way: The more a bank increases its small business lending, the lower the rate it will pay on its capital — as low as 1 percent.
For small banks that — with just a little more assistance — would take more risk in lending to viable small businesses, we’ve asked Congress to extend the successful Recovery Act provisions for Small Business Administration loans.
Through these provisions, SBA waived fees and increased the government-backed guarantee in our largest loan programs. Over the past year, this has resulted in $20 billion in loan support for tens of thousands of small businesses across the country — filling a market gap in lending caused by the recession. With funds running out this month, the President has called to extend these provisions through at least September. In addition, he has asked Congress to permanently increase the size limits in these loan programs, which help small businesses buy more equipment, real estate and other critical assets.
But we can’t stop there. The President recently announced two additional temporary changes to help small businesses survive and grow.
The first would raise the cap on SBA’s “Express” loans, which give small businesses the working capital to restock inventories and increase sales. Express loans use the bank’s own paperwork to approve loans quickly. The President wants to increase the limit on these loans from $350,000 to $1 million.
The second change would help small businesses that occupy their own commercial real estate. Many mortgages are maturing soon, but even profitable small businesses that are making payments on time might have trouble refinancing and face foreclosure. Allowing these small businesses to refinance through SBA’s 504 program will help them lock in long-term, stable financing, saving businesses and saving jobs. Notably, allowing 504 refinancing also will help banks gain more “room on their books” to make even more small business loans.
Finally, we should provide targeted support to the most innovative small businesses, including those with the potential to export American products all over the world.
All of these proposals meet pressing needs in America’s small business community, which employs more than half of working Americans. If combined in a comprehensive jobs bill, they will stimulate our economy and give taxpayers a strong bang-for-the-buck.
Recently, the economy has shown signs of growth. Now is the time for all of us to work together to give America’s 27 million small businesses the tools to create jobs and lead us to recovery as they’ve done throughout our nation’s history.
Karen Mills is administrator for the U.S. Small Business Administration.