Obama wants $30B to boost small biz
President Barack Obama waves as he arrives on stage to hold a town hall meeting at Nashua High School in Nashua, N.H.
TEXT OF STORY
Kai Ryssdal: President Obama did a factory tour and a town hall meeting in Nashua, N.H., today. And he rolled out yet another proposal to pump up small businesses. This one is aimed at community banks and getting them to lend more to small firms, specifically, so those firms can start hiring again. It's going to use $30 billion from the bank bailout, TARP, to do it.
From the Marketplace Entrepreneurship Desk at Oregon Public Broadcasting, Mitchell Hartman reports.
MITCHELL HARTMAN: Lending to small business is down by a quarter since the recession began. Credit lines and home equity loans have been canceled, bank loans have been harder to get.
Bob Coleman, who publishes a newsletter on small-business borrowing, says the president's plan will surely help.
BOB COLEMAN: $30 billion with a "b" is certainly a positive development for the entrepreneur on Main Street. That entrepreneur needs the local community bank to meet payroll, to fund their working capital to pay their vendors.
But Coleman says, even with $30 billion in new government capital and financial incentives for banks, it may still be hard for a cash-starved small business to land a loan. After a lousy year, many of them don't look credit-worthy on paper.
COLEMAN: That small business person walks into the bank, and first of all, revenues have decreased, and most likely profitability, if there is any at all. Bankers are risk-averse.
And some small business owners are now bank-averse.
Greg Carpenter owns a retail bakery in Michigan.
GREG CARPENTER: We were in a cycle where we'd get some credit, do something new, get more credit to do something else new. The recession was the best thing to ever happen to our business.
Carpenter says when the recession hit, he scaled back the business, and he paid off a lot of credit card and bank debt he'd racked up trying to grow. Now, he uses current cash flow to pay for supplies and make payroll. He says when he's ready to expand again, it'll be funded by sales revenue or private investors -- not borrowing.
I'm Mitchell Hartman for Marketplace.