by Bill Golden
Suggestion on how to stimulate the core economy:
- Roll over $50B of stimulus dollars into a small business loan pool for preexisting small businesses that have earned a profit in one of the last two years. Raison d’etre: any small business that earned a profit in this economy must be doing something right.
- Make available to small businesses in amounts equal to 10% of annual sales or a maximum of $250K.
- Do not create bureaucracy. Use the banks to distribute this money.
- Do not let banking bureaucracy hinder. Set the rate that banks can earn on this money at no higher than 4%. Small business borrowers will pay prime + 4%.
- The banks will be responsible for documenting essential credit worthiness of a company — criteria to be set by the SBA. Denial of credit to be reviewed by the SBA. Make this a check-the-box exercise. A credit check of the three agencies can be done in minutes for about $35. Most businesses can easily provide a simple accounting of their assets and liabilities from their county or state annual renewal of business license paperwork. Do not create new requirements unless justified.
- Banks will receive pass-through loan dollars only at the time a loan is made, rather than sending out millions to banks that participate just to have them sit on the money — earning interest while sloooooooooowly approving loans.
We need small businesses to grow and to thrive.
Small businesses are the engine to economic recovery and to jobs.
Our middle class is in danger, and has been in danger for several decades, because it existed largely as the beneficiary of trickle down economics derived from a vertical schema of localized or regional economic supply-and-demand: what goes up (locally) usually came down once upon a time (locally).
Trickle down economics was trashed by globalization and corporate pursuit of ever greater profits — it is all about profits, which is why people get into business or invest in business, but trickle down got destroyed in the process nonetheless. Such economics no longer has anything meaningful to say about the local reality and economy that we live in. Globalization destroyed whatever aspect of ‘trickle down’ may have been valid as a provider of opportunity and capitalistic spreader of wealth through merit and/or earned income.
Profits are largely unrelated to physical location in our current world.
Globalization impacts small businesses in a positive as well as negative way. The positive is that small businesses are no longer restricted to some physical turf based upon their ability to physically travel, sell and/or to buy services and materials.
Using myself as an example, I am a small company owner in northern Virginia with just over 700 corporate customers. Yet my customer base is spread over 21 countries and 38 states. With exception to some services that I buy to support a particular marketing campaign, my profits trickle down to just two locations on the face of this planet as regards to my company directly employing people and where I buy the majority of my materials.
Reality check: the reality of globalization is more than just funny named companies located elsewhere importing their goods. For example, franchise operations (whether Jiffy Lube, KFC or Hotels) and chain operations (Walmart,gas stations, etc.) employ local workers but their product base is from elsewhere, and usually from lower cost manufacturing and production areas. Their profits are also concentrated elsewhere.
An alternate view of reality: People can buy shares in these companies and share the wealth created. Yes, some can. Most cannot. In 1968, 24 million Americans directly owned stocks and that number had risen to 44 million by 2000. For three decades American ownership of stocks and investments increased — that collapsed between 2001-2004 with Americans owning stocks dropping to 20.7% by 2004, down from 25% in 1968.
We need to support small business by supporting their growth because ultimately small businesses can operate out of almost any homebase area. Small businesses will create the majority of local jobs. Small businesses depend upon a versatile workforce to keep them competitive and ‘versatile workforce’ is key to having a thriving middle class. If trickle down economics are ever to have meaning again — and certainly if we say that we are capitalists then we need it to be reality and not a political talking point — then America and Americans will only flourish again when business becomes local. For that to happen we need to increase the flow of capital to small business.
We need to help small business thrive by freeing up capital. If the banks won’t do it then we need another answer.