More strain for small business loans

Marketplace Staff Jan 14, 2009

More strain for small business loans

Marketplace Staff Jan 14, 2009


Bob Moon: As economy sinks deeper into a recession and credit remains harder to come by, many of the nation’s small businesses are struggling to stay open. But recent changes to a popular government loan program are making it even tougher for small companies, especially those owned by women and minorities. From Washington, Ronni Radbill reports.

Ronni Radbill: Gay Gooen runs the consulting firm Strategies for Success. She says Washington-area small business owners are strapped.

Gay Gooen: In the past year, I’ve seen eight small businesses close down for lack of business and lack of funding.

Recent changes to a popular Small Business Administration loan program aren’t helping. The program lends business people small amounts of cash quickly and mainly without collateral. This pilot effort has been up and running for a decade.

The Community Express Loan Program originally targeted women and minority-owned small businesses. But because of legal concerns, the program was broadened to include any small business owner who set up in a poorer area.

Wisconsin Congresswoman Gwen Moore is on the House Small Business Committee.

Gwen Moore: The consequences of that is that I could be a very wealthy person and set up a business in an inner-city community, and receive SBA services ahead of a disadvantaged minority or woman.

Meanwhile, lenders who work with the SBA are hitting the cap on the number of loans they can make because of increased demand for capital. Congress set a financial limit when they kicked off the pilot program.

Erik Zarnikow is with SBA’s Office of Capital Access:

Erik Zarnikow: Until we’re sure that the program is right, that it’s really serving and protecting the borrowers, we’re not in a position to go ask Congress to lift the cap.

But Congresswoman Moore says it’s been a successful program, and lawmakers would like to make it permanent. Since 1999, the SBA has given out more than 36,000 Community Express Loans worth about a billion dollars. She adds until more cash makes it to the local level, the economy won’t recover.

Moore: There is not a politician who has ever been elected to any office who won’t tell you that small business is not the engine of our economy.

Meantime, as the economy sputters, many small business owners are tapping into their personal savings and running up credit card debt — whatever it takes to stay afloat.

In Washington, I’m Ronni Radbill for Marketplace.

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.