Durbin: Improved access to credit for small businesses crucial to job creation
From press release
CHICAGO—Illinois small businesses would receive a much-needed lifeline if legislation included in the Senate jobs proposal to improve access to credit and jumpstart job creation becomes law, U.S. Sen. Dick Durbin (D-Ill.) said Feb. 8 during a news conference in Chicago.
“Small businesses desperately need access to credit in order to grow and hire more aggressively,” Durbin said. “They are the economic engine of this country, and the key to a true recovery. Job creation is the highest priority of the people of this country, and it is my highest priority in the Senate.”
Durbin said a Democratic proposal in the Senate, which he helped write, includes several programs to spur job growth. One program in particular would focus on helping small businesses access the credit they need to grow and hire.
In Illinois, between 2003 and 2006 small businesses created a net increase of more than 141,000 jobs. These 258,000 small businesses in Illinois accounted for more than 90 percent of the net jobs created in Illinois over that period, when the state’s economy was growing. In 2010, however, small businesses in Illinois and in every other state are struggling to stay alive.
Durbin added: “If you own a restaurant, you have to pay the rent, the utilities, the staff and the food you prepare before your customers walk in the door, and that requires access to credit. Yet, the Treasury Department reported in December that the 22 banks that received the most assistance from the taxpayers since the onset of the financial crisis have cut their small business loan balances by a collective $11.6 billion since last April. With the big banks using their money for bonuses instead of small business lending, we need to create stronger incentives for smaller banks and credit unions to step in and lend to worthy borrowers.”
Durbin said he is working with his colleagues in the Senate to make several improvements to the existing Small Business Administration programs that help small businesses access the financing they need to expand. He applauded the Obama administration’s new proposal to create a Small Business Lending Pool.
The Obama administration has proposed a $30 billion Small Business Lending Pool that community bankers would be able to tap to write loans for the small businesses in Illinois that are ready to grow. Banks with less than $10 billion in assets would be able to access this capital very cheaply—they’d owe 5 percent back to the Treasury on whatever capital they take from the pool. However, if banks lend the money to small businesses, the rate they’d owe back to Treasury would decrease to as low as 1 percent. Additionally, the faster the money is lent, the less the banks would owe back to the Treasury.
Both the administration proposal and the Senate proposal would grant small businesses better access to loans, and community banks would benefit from earning a higher rate of interest on their loans than they will owe on the capital taken from the pool. Taxpayers would also receive a small return on that capital borrowed from the lending pool by the banks.
A number of details still must be worked out, and meetings are already under way between the administration and Congress about how best to craft this legislation and get it to the president’s desk for his signature. The small business proposal is a key element of a larger jobs agenda the Senate Democrats unveiled last Thursday, Feb. 4. Work on a part of that agenda is expected to begin on the Senate floor as early as this week. The agenda also includes legislation that would:
• Waive typical Small Business Administration loan fees for small business borrowers and increase the SBA loan guarantees for community banks and credit unions that want to lend.
• Increase the SBA loan limits on 7(a) and 504 loans to $5 million and on Microloans to $50,000.
• Allow small businesses to use SBA 504 loans for refinancing existing operations rather than just new equipment purchases.
Durbin is also working on legislation to assist small businesses in increasing exports through an expansion of the services available within the Department of Commerce, the Small Business Administration, and the United States Trade Representative. The Democratic job agenda includes tax relief for small businesses, shoring up safety nets such as unemployment insurance and COBRA, improving current SBA lending programs, export promotion, rebates for energy efficiency renovations, infrastructure and transportation investments, and assistance to states and municipalities for retaining and hiring firefighters, police officers and teachers.
Durbin said: “Countless small businesses are struggling to stay afloat, while others are ready to expand if we can provide them with the seed money to get moving. We need to get these programs in place quickly. A jobless recovery is no recovery at all.”
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