Small Business Success is the Key to Economic Prosperity by Congressman Kenny Hulshof, Columbia Business Times, August 7, 2004
I believe the #1 thing we must do to encourage job creation is to make it easier for small businesses to expand and hire more employees.
As the 2004 election season officially gets underway, we're hearing many politicians talk about jobs. I believe the #1 thing we must do to encourage job creation is to make it easier for small businesses to expand and hire more employees.
One way to accomplish this is to make capital available to entrepreneurs, especially those who are just starting out. These risk-takers are the backbone of our economy. They must succeed if our economy is to continue its recovery.
However, finding the necessary startup money can sometimes prove challenging. Small businesses usually have fewer assets to commit as collateral. Uncertain earnings forecasts and a high failure rate work against would-be entrepreneurs when they're applying for the necessary funding at the local bank.
That's where the Small Business Administration (SBA) comes in. Congress created a SBA plan that would provide the necessary funds to fill this void in capital markets.
The 7(a) General Business Loan Program provides loan guarantees to eligible small businesses that have been unsuccessful in obtaining private financing on reasonable terms through usual channels. The program operates through private-sector lenders that provide loans, which are then guaranteed by the SBA.
Consider it Uncle Sam as your co-signer.
It has been estimated that SBA loan programs provide as much as 40% of all long-term loans - loans with maturities of three years or longer - to small businesses. The SBA's 7(a) loan program is the single largest source of long-term loans for small businesses.
The U.S. House of Representatives recently approved funding for the 7(a) program. The extension of this popular loan guarantee program will, when combined with an extension of the current fee structure, supply nearly $12.5 billion in financing for small businesses.
This program helps startup businesses in several ways. First, these loans have much longer maturities than conventional loans. The average original maturity of a SBA loan is approximately 14 years. Most conventional loans average maturities of four years or less. This means lower payments, which is crucial when you're just starting out.
It's better for everyone involved if the entrepreneur is able to invest what capital is available on equipment or employees. The 7(a) loan program is one of the governments' best economic development instruments.
Small businesses are the lifeblood of our economy. According to the National Federation of Independent Business, small business accounts for half of private, non-farm gross domestic product, employs half of the private work force and generates 60 to 80 percent of new jobs each year.
Small businesses must be given every opportunity to succeed. It is imperative that we create an environment where risk-takers can not only survive, but thrive.