In his State of the Union address, President Barack Obama laid out a sweeping agenda covering issues including climate change, immigration and gay rights. He called for a “smarter,” not bigger, government “that encourages free enterprise.” While many of the specifics didn’t make the speech, the administration has started to get behind a targeted small-business finance initiative that could vastly expand capital access where it is needed most.
Americans know that the principal driver of job creation in this country has been everyday Americans who have taken personal risks to start a business. The Small Business Administration estimates that small businesses create nearly 65 percent of all net new jobs while employing half of the private sector employment.
The bottom line: Small businesses have earned the distinction as the engine of America’s economy, especially growing small businesses.
While the latest iPhone app or widget can be made on a laptop from a coffee shop, most businesses need real estate for facilities and/ or machinery and equipment to offer products and services.
Access to capital remains their biggest challenge. In the wake of the financial crisis, small-business lending has been weak, with the number of small-business owners possessing a business loan falling 15 percent from 2008 to 2011, according to the National Federation of Independent Business’ research foundation. But for small businesses, access to credit is critical for both initial and continued success.
Today, there are smart initiatives — costing taxpayers nothing — that embody precisely the kind of public-private partnership that will enable small businesses to grow.
Last week, Democratic Louisiana Sen. Mary L. Landrieu, chairwoman of the Small Business and Entrepreneurship Committee, introduced the Commercial Real Estate and Economic Development Act, along with Sen. Jeanne Shaheen, D-N.H. The CREED Act would extend the SBA’s extremely effective 504 Loan Debt-Refinance Program, or “Debt-Refi,” for five years. In a trial period that operated for less than a year in 2011-2012, more than 2,700 businesses refinanced nearly $7 billion in old, expensive debt, leading to savings of up to $20,000 per month per business. These savings were reinvested back into the small businesses to create and sustain jobs.
The SBA’s 504 Debt-Refi program helps small businesses in good financial standing free up cash that is currently locked up in fixed assets like their commercial real estate or machinery, allowing these small businesses who are raring to grow to transform old, expensive debt into game-changing savings each month.
Extending this Debt-Refi program could give more than 250,000 small businesses the same kind of success that we saw over the trial period.
Cost to the taxpayers? None.
The SBA’s 504 Loan Debt-Refinance Program is made possible by Certified Development Companies, SBA’s community-based partners that work hard to make sure that small businesses, the communities in which they live and participating lenders all benefit from the resulting economic growth and job creation.
As politicians in Washington move from rhetoric to action and look for bipartisan measures that promote smart government, economic growth and job creation, I hope they will look to Sens. Landrieu and Shaheen’s example as a way to empower small businesses and ultimately get our economy back on track.
Beth Solomon is the president and CEO of the National Association of Development Companies, the trade association of Certified Development Companies.