Aid package has small businesses watching
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Congressional efforts to spur the economic recovery could re-create the atmosphere created by incentives offered early in the recession, when lawmakers turned to small business for help creating jobs.
And in this election season, the politicians are counting on the plan to save their own jobs as well.
The Senate voted 61-38 Thursday to create a $30 billion government fund to encourage community banks to open up lending for small businesses and boost Small Business Administration loan programs.
The measure, which also features $12 billion in tax breaks and incentives for small businesses to expand and hire new workers, will now face almost-sure approval by the House of Representatives and White House.
Democrats say the initiative could create 500,000 new jobs, a political must for President Barack Obama, who has found his numbers either too low (Gallup approval rating: 45 percent) or too high (unemployment rate: 9.6 percent) for the party's liking.
For local small-business organizations following the legislation through its long slog through Congress, the number they are watching is how many clients will take advantage of the programs.
After Recovery Act incentives expired in May, small-business owners were reluctant to borrow while Congress was still debating new legislation. The difference between a loan approved before the legislation and after could be tens of thousands of dollars.
"We actually have two loans right now in the Recovery Act loan queue for close to $2 million," said Rebecca MacBlane, executive director of the Downtown Regional Development Funding Corp.
If the legislation moves through Congress as expected, "They'll save an aggregate of $30,000 in borrowers' fees now." Ms. MacBlane's organization requires borrowers to produce one new job per $65,000 loaned.
Some clients waited until they couldn't wait any longer and had to take a loan and stomach the borrowers' fees. Many of RDFC's clients are in commercial real estate, and loans to fund construction were needed before too much time was lost to colder weather, she said.
After incentives such as a 90 percent guarantee on loans and waived borrowers' fees ended in May, the local chapter of the U.S. Small Business Administration saw a drop in activity of more than 50 percent, said District Director Carl Knoblock.
"Last winter, we were getting extensions month-by-month, and we didn't know if it would be there or not," he said. "We see great potential with this because it gives us stability."
Mr. Knoblock thinks the legislation could usher in an even busier time than Recovery Act days, since the maximum amount for eligible loans has expanded from $35,000 to $50,000.
"There will be a resurgence," he said. "Especially for home-based businesses and things where you need lower amounts."
The bill, approved by only two Republicans and derided by critics as another round of misdirected government spending, comes as candidates campaign against stimulus funding that helped Wall Street firms limp out of a market crisis in late 2008.
Part of the legislation is "$12 billion in targeted tax credits only available to people who jump through certain hoops," said Kevin Shivers, state director of the National Federation of Independent Business.
"We need to recognize the problem in small business is consumers aren't buying stuff," he said, calling for across-the-board tax relief for business and consumers who could be weighed down by expenses like the estate tax and recent health care legislation requirements.
But even as a national debate wages over how Congress allocates funds, companies that receive government help aren't necessarily in dire straits, said Raymond Vargo, director of the University of Pittsburgh's Small Business Development Center.
Mr. Vargo and his colleagues were sending an e-mail newsletter to members Friday with details on the plan because they anticipated heavy interest in it.
"Any smart business owner always looks at the available programs," he said. "It's there. Why not take advantage of it?"
First Published September 18, 2010 12:00 am