President Obama’s latest plan will allow the government to spend up to $15 billion to buy small-business loans that are now stalling community banks and lenders. That, in turn, will allow those banks to start lending again to small companies to invest, pay bills and survive, according to a March 17 article in The Washington Post.Over the past decade, small businesses have created about 70 percent of the new jobs. As their credit lines have dried up, they have started to struggle or die. The $15 billion will come from a bailout plan already approved by Congress to rescue the financial sector. The president’s aides say the plan will offer fast, direct help.
Other White House steps to help the lenders include bigger lending guarantees, reduced fees and quicker turnaround times for loans. Treasury Secretary Timothy Geithner has urged the banks to start lending to businesses again. He also has ordered the Internal Revenue Service to issue new rules to help small businesses, according to The Post article. One of them will allow businesses that make up to $15 million to claim losses for the past five years in the current tax year. That amounts to a rebate on taxes paid in previous years, according to the White House.
In the meantime, the Small Business Confidence Index of the Small Business Research Board has increased slightly during the fourth quarter. The construction and contracting industry reported an SBCI of 34 during the fourth quarter, a three point increase from the 31 recorded during the second quarter of 2008, according to an SBRB study co-sponsored by International Profit Associates.
The higher construction and contracting SBCI resulted from a positive outlook regarding the general economy in the next 12 months with 40 percent of the respondents reporting expectations of an improved economy over the next 12 months; this is an increase of 12 points from the second quarter of 2008. Also contributing to the higher SBCI is the determination that 27 percent of respondents plan to increase hiring in the next year. This is up three points from the previous study held in the second quarter of 2008.
I’m interested to hear from the small glass and glazing businesses out there. What is your outlook on the president’s plan? Do you believe this is going to help you in any shape or form?
By Sahely Mukerji, news editor/managing editor, Glass Magazine
7 comments:
Yes, I am quite sure Obama's plan will provide a boost to the economy. It will start to turn around this year, and construction will benefit. The turnaround will take a while, but it is bound to happen.
The plan will only likely provide limited help for small businesses. They have strict size requirements that depend on your industry. For instance, when it comes to auto dealerships, only about 20 percent of the nation's 19,000 franchised auto dealers are eligible unless the program is expanded.
Thank you for your comments. I agree with you Joe Schmoe that the turnaround will take time but it will happen.
And Anonymous, the U.S. Small Business Administration site provides a lot of information on eligibility criteria. I found this while tooling around on the site: http://usgovinfo.about.com/gi/dynamic/offsite.htm?zi=1/XJ&sdn=usgovinfo&cdn=newsissues&tm=5&f=00&tt=2&bt=0&bts=0&zu=http%3A//www.sba.gov/contractingopportunities/officials/size/SUMM_SIZE_STANDARDS_INDUSTRY.html
The economy is cyclical so of course it will get better. All of this government involvement is not necessary. The problem for small business is that taxes are going to be substantially higher for us in order to pay for the bailout plan. Basically we are going to get taxed at a higher level in order for the government to bailout big companies that have not properly run their businesses. Small business is the heart of this country but we can't continue to count on it to pay for everything. The long term effect of the stimulus and bailout plans on the economy is not positive. We will pay for it for years to come. These comments are not predicated on a specific party line, just a small business owner.
The key words are: "Geithner has urged banks to start lending".
The banks have taken money from the government and held on to it. That was not the intent. Unless the government steps in and makes the banks start lending to small businesses... it will not happen. Small businesses needed the money yesterday. This "urging" of lending will happen tomorrow. How many will fail today, before the money starts to flow?
From my understanding, Geithner will do more than "urge" the banks to lend money. He's proposed a sweeping expansion of federal authority over the financial system, including large banks, some hedge funds, trading in derivatives and money market mutual funds. Most of these initiatives would require legislation, but if put in place, the government would have the power to take over or shore up any troubled firm that poses a risk to the broader economy.
Thank goodness some help is on the way. It is really hard out there and I hope that this doesn't get stuck in red tape. Auto glass shops that are smaller like mine need all the help we can get. Windshield repair and replacement is not as profitable as it used to be.
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