Small Business And The Plan For Access To Capital

small-businessThe Lifeblood Of Small Business

For most entrepreneurs, policies that are aimed at providing small businesses with access to the capital that they need are critical, this according to an October survey of firms that bring in an annual revenue between $1 million and $20 million.

Mitt Romney, the Republican candidate for President, has run on a platform that emphasizes smaller government, and has said that he would make it easier for entrepreneurs and small businesses to garner the investment dollars needed to grow their business through the cutting of taxes and simplification of the tax code. He would also reduce federal regulations and replace the Affordable Care Act with more cost effective health care reform.

President Barack Obama has pointed to his track record thus far as it applies to creating programs that are aimed specifically at helping small businesses find the funding that they need. In 2010, the Small Business Jobs At was signed into law, creating the Small Business Lending Fund, a $30 billion program directed at community banks in order to boost small business loans. The fund was designed to raise capital at the smaller banks, most of whch tend to lend more often and more heavily to small business owners.

Unfortunately, since the fund began actually disbursing money last year, only about $ billion has found its way into those community banks, and the result was a small business loan increase of only $6.7 billion. These figures are from the Treasury Department database. The major problem seems to be that many of these banks used the money allocated to pay back bailout funds as opposed to creating new loans. Banks were not prohibited from using that money to repay TARP debt.

A Number Of Solutions

Outstanding loans to small businesses have been falling steadily since a 2009 peak, with loans down to $587.9 billion from $607.6 billion just a year earlier.  Some executives place the blame squarely on the federal regulatory environment that is currently in play, saying that additional costs and time dedicated to regulatory burden and compliance is choking off credit.  They further believe that potential new regulations would make the problem even worse.

Also, poor economic conditions are preventing small businesses from meeting the lending standards set forth by many banks. With a sluggish economy not providing the basis for increased sales and cash flow, the requirements just aren’t there for many small business owners.

This past April, President Obama signed the Jumpstart Our Business Startups Act to help small businesses raise capital through the easing of securities regulations.  The Act would allow small businesses to raise as much as $1 million in equity funding over the internet through crowdfunding website that are registered with the US Securities and Exchange Commission.  The idea has been met with criticism, charging that unsophisticated investors have the potential to be scammed.

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