Help For Small Businesses: Examining The Options

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Renee Montagne talks with Karen Mills, head of the Small Business Administration, about how small businesses are faring, credit challenges, and efforts to renew federal funding and other measures to make it easier for entrepreneurs to borrow money.

RENEE MONTAGNE, host:

President Obama has been traveling all this week talking about jobs. Today he unveiled initiatives aimed at helping small businesses, because when you talk about jobs, you're talking about small businesses. At the president's side will be Karen Mills, head of the Small Business Administration. She joined us in our studio and told us that more than half the people employed in this country own or work for a small business.

Ms. KAREN MILLS (Small Business Administration): Our economy creates and loses jobs every quarter in the millions. But of the net new jobs, the jobs come from small businesses: both small businesses on Main Street and many of the net new jobs come from high growth, high impact businesses that are located all across the country.

And these are not just high-tech new businesses. These are hundred-year-old manufacturing companies that have reinvented themselves and they're going from 25 people to 40 people to 100 people, and that is the market that we need now to give them the tools they need to get those next people hired.

MONTAGNE: Let's talk about the things President Obama is proposing today.

Ms. MILLS: We have a whole package for small business job growth that we have been unveiling over the past couple weeks. And today we're going to add another component to it. First of all, some of the small businesses that are out there haven't been able to get the loans that they need.

We were able in the Recovery Act to get a program where we increased our loan guarantees to 90 percent. Because we had that program, a bank wouldn't have to take that much risk. So if you came in and you said I need a loan and the bank said, hmm, I like you, I just need a little help, we were there with our 90 percent guarantee - today we're going to add to some of those programs.

MONTAGNE: But I wonder, when you talk about loans, how many businesses are really asking for loans at a time when they're still not getting the customers the way they used to and less demand for products? I mean have you heard that when you travel the country? I don't want a loan. That's not going to help me.

Ms. MILLS: Well, a year ago, when the credit market froze, people were saying to us, I need a loan just to stay in business. And the word has really changed. Demand is definitely down, but as I travel around I am hearing more need for that extra help to hire the next person, buy that piece of equipment, or most often, get the inventory in, the working capital support to take that next order.

MONTAGNE: And the banks, do you find banks say to you we're just not taking the kind of risks that we have to take with the small business if, presumably, there's perceived to be a greater risk? Especially an entrepreneur.

MS. MILLS: There are banks out there right now that actually have another problem, which is they don't have the capital. For those, we announced that we're going to have a $30 billion lending facility, which will be available to small community banks. This is like we helped big banks, now we're really going to put some money into small banks.

MONTAGNE: And this is TARP money that...

Ms. MILLS: Well, small banks have said they don't really want to take TARP money. There's a stigma associated with it that they may be failing.

MONTAGNE: They don't like the name for starters.

Ms. MILLS: Right, so this is a separate facility that would not carry that same stigma. But it would allow a small bank to take that capital and lend it out to small business. And we have proposed now a package that helps them get not only loans, but also tax relief. Small businesses are going to get a tax credit for hiring the next worker, $5,000; they're getting accelerated depreciation in this jobs package, which helps them get cash back immediately from money that they put into new equipment. And we're talking about zero capital gains on people who invest in small businesses.

MONTAGNE: The economy is showing some signs of improvement. Do small businesses show the first signs or are they the last to respond?

MS. MILLS: In past recessions, small businesses have led the way to the recovery. And we are not seeing that yet. We still have a ways to go. That's one of the reasons that it's really important that this small business jobs plan get implemented, because these small businesses are going to be the job creators.

MONTAGNE: Karen Mills is head of the Small Business Administration. Thank you very much for joining us.

Ms. MILLS: Thank you.

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