by Andrew Tobias |
SMALL BUSINESS BOOST The way to help small businesses is NOT to give them tax cuts – what good's a tax cut when you're making no profit to be taxed ON? I refer you back to my five questions on tax cuts. But yesterday the Obama Administration did three things concrete things that WILL help small business: It waived the fees small businesses have to pay to take out SBA loans. It raised the Federal guarantee on such loans from 75% and 85% to 90%, which will encourage more lending (yet still leave the lender on the hook for significant scratch). It set aside $15 billion of TARP money to buy securitized SBA loans, until private investors regain their appetite, so that the banks can sell them and, with the proceeds, make new small business loans. That money will be ready to start buying 7A loan securitizations by the end of this month – any minute now – and 504 loan securitizations by mid-May. To take just one concrete example of how constructive this is: I have an investment in a private company that has profitable orders it can't fill. It lacks the working capital to pay suppliers, shippers, and so on. It may have to close and lay everyone off. But with an SBA loan, it would be able to keep people employed filling the orders, remain in business, and continue to grow. Now, because of the Administration's swift action, it has a better chance of getting an SBA loan. Compare that with telling the owners of this company that they will get a tax break on their nonexistent profits. I think the Obama approach makes more sense.
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