The Homa Files

Ken’s Take: I was surprised recently when — for a special occasion —  I attempted to make reservations at an Annapolis restaurant (Northwoods) that many locals propped as the the best in the city. It had closed after a couple of decades.  An article in the local newspaper listed it as a casualty of the economy.  Also, I got emails on the same day from a local painter — practically begging for work at any price, and from a local carpenter who was networking to land a job in web design (you read that right).  Since then, I’ve noticed the number of small businesses dying.  Bottom line: the stimulus package is giving more to ACORN than it is to small businesses in total.  That’s sad.

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Excerpted from Knowledge@Emory, “Will the 2009 Stimulus Act Fizzle?”, February 12, 2009

Have you heard anything about what Congress is providing for small businesses in the current economic stimulus package being debated in Washington?

Small businesses in particular are concerned that the stimulus package misses the boat. Small businesses are defined as companies with fewer than 10 employees, and they account for almost 80 percent of all U.S. companies, according to the National Federation of Independent Business (NFIB) lobbying group. Small businesses are credited with generating about 70 percent of all new jobs.

“Funding, not consumer spending, is the core issue for small businesses,” he says. “Right now lenders are hesitant to extend money to commercial borrowers even when they have a good track record, and in some cases are actually calling in loans that they have already funded.”

“The freeze in funding is hurting small businesses much more than the shortfall in sales is hurting them  … Without the necessary cash to grease the gears and keep the business going, companies have had no choice but to reduce costs. And that, unfortunately, results in a cutback on capital expenditures and a need to lay off workers. So cash, in the form of loans, is the mechanism that is most important, but the stimulus bill can do little to help in that regard.”

“Typically, the propensity for risk taking goes down in a weak economy … The typical rounds of early stage financing from friends and family and angel investors depends on excess capital. Reduced wealth means that these usual sources of early venture financing are unavailable to entrepreneurs … in the current environment, many banks are not willing or able to provide loans or lines of credit, leaving very few options for entrepreneurs.”

Increased SBA funding in the stimulus package could provide some rapid assistance to small businesses

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Full article:
http://knowledge.emory.edu/article.cfm?articleid=1218# 

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This entry was posted on February 17, 2009 at 7:45 am and is filed under Financial Crisis, Small Business, Stimulus Plan. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.