At today's Senate Small Business Committee hearing, Senator Kit Bond (R-MO) made comments agreeing with my initial assessment of the recently announced Treasury plan to save small-business lending. He said that it will "only likely provide limited help for small businesses. We must attack the root of the crisis," which mean dealing with toxic assets.
Also, one of the people who testified explained another problem with the plan. Bob Cockerham of Car World, Inc. is a small-business owner who operates two car dealerships in New Mexico. Since August of 2008, his business has dropped from 80 employees to just 17, and he's had to close a location since his lenders have withdrawn financing. That's despite the fact that he testified that he has never been late on a payment. So obviously Cockerham is quite interested in the attempt to fix the small-business credit crisis.
But his worry about the program explains part of the reason why so few small businesspeople take SBA-guaranteed loans (see my previous post). They have strict size requirements that depend on your industry. Businesses outside those maximum requirements can't qualify for the loans. When it comes to auto dealerships, Cockerham says, "only about 20 percent of the nation's 19,000 franchised auto dealers are eligible unless the program is expanded."