14 January 2009

What about TARPs for small business?

Marketplace Story (2009)
Today's Marketplace radio report on an SBA program originally intended to help disadvantaged and woman-owned small businesses highlights the need to look beyond Citibank and AIG. The small business engine is sputtering too, but it's not getting the attention it deserves.

The SBA's Office of Advocacy (as reported by about.com) stated in 2005 that:
Small businesses are job creators. Office of Advocacy funded data and research shows that small businesses represent 99.7 percent of all firms, they create more than half of the private non-farm gross domestic product, and they create 60 to 80 percent of the net new jobs. In 2004, there were an estimated 23,974,500 businesses in the U.S. Of the 5,683,700 firms with employees, 5,666,600 were small firms.
Loans provided to small businesses arguably have a faster track to the real economy. TARP funds have been used for banks to acquire other banks, to prop up pension funds, to increase reserves against future losses, and to pay attorneys to develop plans that never come to fruition. Loans to big business potentially affect more employees and indirectly a broad network of suppliers and communities, but huge sums lend to large firms represent a small number of huge bets.
A similar analysis was provided by an AllBusiness.com story that appeared around the time of this post.