The Obama administration announced new initiatives from the Department of Treasury this week that will increase the ability of small businesses to acquire loans.
“This is a top priority for the president, that we work together,” said Gene Sperling, counselor to the treasury secretary, in a conference call Wednesday. “Small businesses yield job creation and improve the labor market.”
Small businesses are not able to fulfill this expectation if they cannot get the necessary credit. The proposed initiatives would make it easier for community banks to provide loans to small businesses.
According to Karen Mills, administrator of the Small Business Administration, the majority of small businesses receive loans from community banks that possess less than $1 billion in assets. Sperling also said 60 percent of community banks’ loans are to small businesses.
In an effort to reduce the risk community banks face in providing loans to small businesses, Sperling said the initiatives would provide a lower rate of 2 to 3 percent for banks willing to provide a plan for their lending, as well as quarterly reports from the businesses.
Roughly 330,000 loans in the past eight months were issued to small businesses across the country, totaling nearly $13 billion. Judging by this progress, Sperling said he is “very optimistic.”
The initiatives are expected to undergo a two- to three-week consultation period, but Sperling assured they are to be implemented “expeditiously.”
University of Wisconsin Small Business Development Center Director Neil Lerner agreed on the importance of small businesses in job creation and subsequent economic stabilization. He said small businesses produced all the net new jobs in Wisconsin from 2005 to 2007.
Lerner outlined the differences in reactions between large companies and small businesses when the economy falters, adding large companies that employ thousands of people lay off jobs in great numbers, and jobs are lost to workers overseas or to automation. In contrast, small businesses lay off substantially fewer employees, and when they grow, they add new employees.
Lerner added innovation could be found in Madison, citing that small businesses specializing in biotechnology and alternative energy are in high demand.
Rep. Louis Molepske, D-Stevens Point, said he supports Congress’ shift of focus to small businesses and added it would be helpful if the focus could be on getting small businesses more funding.
“The ability of entrepreneurs to expand and explore the economy as it relates to their business has a direct correlation to the initial … access to capital,” Molepske said.
“Small businesses are vital to the financial well-being of the state’s economy, and their economic growth and success will be directly related to the speed of our recovery from the recession and our job retention and need going into the future,” Molepske said.
Kristin Ruesch, spokesperson for the Republican Party of Wisconsin, could not be reached for comment as of press time.