Last fall when the government passed what was then a $700 billion economic bailout package, largely intended to prop up failing institutions such as AIG and Citibank, one could hear the collective groan of small business owners across the country. Although they displayed a variety of reactions, most were perplexed by the idea that as self-sustaining entrepreneurs (already squeezed by the worsening credit crunch) they had to live and die by their own success or failure – while the government was going to take care of big businesses that had created the financial crisis to begin with.
President Obama seems to have been listening. Today, he announced a three pronged package intended to help small businesses. The program includes a $730 million chunk from the stimulus plan to reduce lending fees while increasing government guarantees on a portion of Small Business Administration loans up to 90%. It also seeks to increase bank liquidity by injecting $15 billion into banks in order to thaw the credit market and boost lending to small businesses.
In October, we spoke to a group of small business owners to get their reaction to the original bailout plan. Following the administration’s latest announcement targeted at small businesses, we reached out once again to get those owners’ take on Obama’s new plan.
Gina Schaefer, who is set to open her sixth Ace Hardware store in the Washington D.C. (area) says that while she thinks the speed at which the administration moved to do something signals that Obama does understand the important role that small businesses play in the American economy, she remains skeptical that it will spur the banks to make loans. “I don’t think it gives them more of an incentive then before,” she says. “It is always a guess as to whether a bank will take a chance on someone especially if they have no track record. The government says it is going to increase what they back and that is encouraging but it doesn’t mean you have a whole bunch of people that are seen as less risky to give to.”
Shaefer thinks however there is an upside if you are already in business. “If you have a track record and need an influx in cash this is definitely the kind of thing that will help – as long as businesses hear that message.
But I don’t think it is going to spearhead any kind of great revolution in this country for new business owners. The banks have traditionally been conservative and they are not going to hand out money any more freely because of this bill.”
Still she says that overall it is a positive move for the Obama Administration to make. “But if the banks weren’t in the predicament they are in they would increase their lending.” Of course Schaefer also notes that if the banks weren’t in the predicament they are in, the government might not have felt the need to hatch such a program in the first place.
Stay tuned we will continuously update reaction from small business owners.