Small Business

Posted: 03/19/09


Small Business: Largest GDP Sector "Gets" 2% of TARP
Well, sort of...


Small Business as a sector is the largest contributor to our Gross Domestic Product, (GDP) and produces the majority of jobs in the United States... jobs most likely to stay in America and not be off-shored. So you would think the Obama Administration would concentrate on building and supporting small business rather than giving us rhetoric and photo ops.


Think again. Our "Johnny-come-lately" president just threw us a bone... two percent of TARP and in reality Small Business may never see it.


The administration made the offer sound quite impressive. On March 16th in an address to a group of small business owners invited to meet with the President in the East Wing of the White House, President Obama...


"emphasized what has already been done through the Recovery Act: raising the guarantees on SBA loans to 90 percent, eliminating costly fees for borrowers and lenders, and a series of tax cuts for small businesses and tax incentives to encourage investments in small businesses. He noted further that in his budget, he proposes permanently reducing to zero the capital gains tax for investments in small or startup businesses, as well as instituting tax credits for health care as part of his broader health reform effort. But he concluded that unless credit was unlocked for small businesses to grow, none of this would be successful, and said that he would have the Treasury Department begin purchasing up to $15 billion of SBA loans through the Troubled Asset Relief Program, or TARP. He explained that now "any lender that provides SBA small business loans will have a buyer for those loans."


Okay, what has actually happened?

1. The Recovery Act raised SBA loan guarantees to 90%, eliminated loan fees, and supposedly gave small businesses and investors in small businesses tax incentives.


2. President Obama's budget hasn't been accepted and his healthcare reform hasn't taken place yet, so we'll skip the credit for "zero capital gains" and "tax credits for health care" until they materialize.


3. The Treasury has been authorized to "begin purchasing" $15 billion of SBA loans through TARP.



This means out of the $787B American Recovery and Investment Act BANKS receive 90% guarantees and fees waived on new SBA loans. And don't forget that $15B more of TARP. It's allocated to buying up BANKS current SBA loans... the theory being banks will be more inclined to lend. (Haven't we seen this one before? Oh yes, when we lost the first $350B of TARP money.) Granted, President Obama has included restrictions saying banks taking TARP funds now will have to prove that a certain percentage of their lending goes to small businesses... (yeah, if you can still qualify for an SBA loan. Do you guys know what a bank cancelling a business line of credit does to your credit report? Even if your credit was good! Heard about any of that going on lately?). And for those worried Small Business will become the next "bubble" created by "forced lending"... don't. Two percent of the $700B TARP is the least of America's worries. Unless you counting the AIG bonuses.


So why does Small Business deserve better? According to the 1998-2004 statistics report produced for the SBA Office of Advocay, "The small business share of GDP ... held virtually constant from 1998 through 2004 starting at 50.5 percent in 1998, reaching 49.9 percent in 2000 then rising to 50.7 percent in 2004." According to the 2007 report which references the SBA Office of Advocay "Frequently Asked Questions" sheet, small businesses:


• Represent 99.7 percent of all employer firms.

• Employ about half of all private sector employees.

• Pay nearly 45 percent of total U.S. private payroll.

• Have generated 60 to 80 percent of net new jobs annually over the last decade.

• Create more than half of nonfarm private gross domestic product (GDP).

• Hire 40 percent of high tech workers (such as scientists, engineers, and computer workers).

• Are 52 percent home-based and 2 percent franchises.

• Made up 97.3 percent of all identified exporters and produced
28.9 percent of the known export value in FY 2006.

• Produce 13 times more patents per employee than large
patenting fi rms; these patents are twice as likely as large
firm patents to be among the one percent most cited.


Small Business does more than any other industry sector for America and you can bet we're not going to sit around until Big Government gets around to us. We have work to do! Obama and the Democrats can keep their photo ops and lip service. They've invented their own kind of "trickle down" policy... now isn't that ironic.


*FAQ Source: U.S. Dept. of Commerce, Bureau of the Census and InternationalTrade Administration; Advocacy-funded research by Kathryn Kobe, 2007 ( and CHI Research, 2003 (www.; Federal Procurement Data System;U.S. Dept. of Labor, Bureau of Labor Statistics.




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