SBA Killing the Economy One Small Business at a Time



The latest U.S. Census Bureau shows that 98 percent of all U.S. firms have less than 100 employees. These firms create over 97 percent of all net new jobs and generate over 50 percent of the Gross Domestic Product (GDP).

Congress is generally aware of these statistics, which is why it chose to authorize a new loan program specifically geared to help small businesses. Simultaneously it perpetuates the doom of hundreds of small firms across this country on a daily basis.

Many in the financial community and even this newspaper applauded the U.S. Small Business Administration (SBA) in June when they unveiled a lending program specifically targeted to help small businesses through these challenging economic times. The America’s Recovery Capital (ARC) program was to provide emergency bridge loans as part of a stimulus package slated to save jobs and provide a cash flow answer for small firms.

(Congress allocated the ARC program $255 million and allow about 10,000 loans of up to $35,000 each.)

However, months later no one in any local bank nor at the district level of the SBA can tell us that one single company has received funds from this so-called stimulus package.

There are thousands of local businesses, still operating, quietly taking one day at a time that could use a loan (a bailout of sorts) from the government that could help them through the next few months while the economy recovers.

The SBA told us that the ARC loan can provide up to $35,000 in guaranteed, short-term relief for viable small businesses facing immediate financial hardship to help ride out the current uncertain economic times and return to profitability.

ARC loan funds were designed to be used for payments of principal and interest for up to six months on existing, qualifying small business loans, capital leases and vendor loans.

At the end of six months the loan payments will be deferred for 12 months followed by a five-year period of monthly principal payments. ARC loans are 100 percent guaranteed by the SBA with the interest paid by the government for the life of the loan.

These loans were supposed to be readily accessible to small business owners who could demonstrate profitability in one of the last two years and be able to project sufficient cash flow to meet current and future loan payments over a two-year period from the date the loan is approved.

Many local small business owners reported to CBN that they immediately called their bank and asked them to help them through the loan process. Some local banks, including LibertyBank, Wells Fargo and Sterling Bank decided to assist their customers despite the fact that the banks get nothing from it and the process is extremely time consuming and typically bureaucratic.

Local financial institutions that decided to assist their customers have become as frustrated as the companies who applied for them. The SBA has also demanded that banks release some of their own collateral with NO compensation and have required small local banks to invest considerable time into the application process with no compensation.  None of this is the least bit fair or equitable, which we can only assume is exactly the reverse of Congressional intent.

Cascade Publications Inc. was one of the companies that applied for the ARC loan back in July. We have been approved for a portion of the funding but have yet to see any of the money. We were not approved for the entire amount because the underwriter for the SBA made a judgment call on certain loan payments that could be paid by the funds (a company car and building lease payments were disallowed).

So the government offers interest free loans to help small businesses, but no one can get any of it. Why?

There is no question that the SBA is a bureaucracy making up its own rules as it goes.  The ARC program was intended to be straightforward and effective, with loan approvals to be made within 10 days of the application. However it has simply become a travesty to those in the small business world who have watched as billions of dollars of bailout funds have made it into the hands of corporate America and left the rest of us standing by the wayside.

It is obvious that those in the SBA who are deciphering the rules and passing out unyielding restrictions have never run a small business and certainly haven’t had any experience surviving
a recession.

How can the federal government rationalize giving billions to a bunch of dead beat corporations whose leaders reward themselves with huge bonuses and not give one small business in distressed Central Oregon a mere $35,000?

The SBA misled business owners when it said it was casting a wide net as far as who would qualify to receive an ARC Loan. Legitimate reasons for receiving funding through the program included business owners who have an immediate need to meet credit card obligations, who are behind on lease payments, who need to pay off vendors and suppliers, whose customer base is shrinking, who have less working capital or short-term credit options available than normal, who have the inability to restructure existing debt, including credit card debt, who have laid off employees, who are experiencing a loss of available goods and services from suppliers or are experiencing an increase in the cost of doing business.

Under those terms, in these current economic times, just about every small business owner in Central Oregon could be eligible to obtain an ARC Loan. But none have!

The federal government is having a significant negative impact on the economic recovery of small businesses in the United States of America. Unfortunately, the federal government has created colossal loopholes that have failed small business owners. PHA

Note: Cascade Publications Inc. has expressed our concerns to Senator Ron Wyden’s office and we have talked to Dennis Lloyd, the head of the SBA district office in Portland.  Wyden’s office is continuing to look into the problem and Mr. Lloyd told us last week that there “does seem to be some issues with the approvals of the loans. Rumor has it that it’s being looked into and may be revised as early as the first of September…with potential for some policy changes.”


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