Small Business Stimulus Bill Won’t Help Small Businesses

Posted by on September 29, 2010 in Business Financing, Business Management, Business News [ 0 Comments ]

economic stimulusEarlier this month the Senate passed the much-delayed Small Business Stimulus bill that is expected to become law after receiving approval within the House of Representatives. Supporters of the proposed legislation claim that the combination of a $30 billion fund that the government would invest in independent community banks to encourage lending to small firms as well as a package of business-related tax breaks, will encourage both hiring and business investment.

But, according to the results of a recent survey by the National Federation of Independent Businesses, Credit in Deep Recession, there is little reason to believe that the bill will have even a fraction of the intended impact.

Here are a few reasons why:

  • Small businesses are not in the market for small business loans. Only 8% of small business owners responded that access to credit was a major concern.
  • Of those business owners who are seeking loans or lines of credit, the majority are using the funds to help ease their cash flow- a fact that is not surprising given that sluggish or declining sales is the number one concern among 51% of small business owners. In short, hiring and business investment is not likely to change as a result of the new legislation.
  • According to the survey, the vast majority of small businesses choose to bank with either the major commercial retail banks (46 %) or regional banks (18%).  The problem is that the new stimulus bill is specifically targeting small, independent banks to get money out into “Main Street.” According to the survey, only about a third of small businesses use a local bank as their primary financial institution.
  • The underlying theme throughout the NFIB’s survey was the sense of mistrust and uncertainty small business owners are harboring towards the economy and the new health and financial reforms that are set to phase in over the next few years. The proposed tax breaks are unlikely to have much impact on hiring or investment while this economic precariousness persists.

In short, it is questionable whether the new stimulus package will be able to breathe any life into our ailing economy.

Gary Barzel is the senior editor at FastUpFront.com where their mission is to help businesses succeed by offering simple and effective programs for business financing while focusing on quality service.

Image Credit smbceo.com


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