Two U.S. senators this week called on the federal government to provide immediate aid to small-business owners squeezed by the ailing economy.
In a joint letter to the head of the Small Business Administration, Sens. John Kerry (D-Mass.) and Chuck Schumer (D-N.Y.) urged Acting Administrator Sandy Baruah to increase efforts to help small businesses access capital now, instead of forcing them to wait for the $700 billion rescue plan to reach private lenders.
“Experts say it will take months for the rescue package to reach small businesses,” Kerry said in a statement. “But small businesses can’t wait any longer for a lifeboat to arrive. They need help now and the SBA has that power.”
Among other proposals, Kerry and Schumer called on the SBA to make bridge loans available through the agency’s Disaster Loan Program, which they said was a fast way to inject capital into struggling firms. They also asked the agency to tailor its 504 and 7(a) loan programs, allowing borrowers to refinance and access the equity built up in their businesses.
Last week, the agency reported that the number of government-backed loans for small businesses fell by 30 percent this year, down from a record high in 2007. SBA officials blamed the declines on tighter credit conditions, declining creditworthiness, and reduced demand from skittish borrowers.
In the letter, Kerry and Schumer said the agency is working at cross purposes with the Treasury Department in its efforts to implement the financial rescue package and unfreeze credit markets, saying interest rate cuts are "causing lenders to lose money on SBA loans and driving them out of the program.”
Kerry, the chairman of the Senate Committee on Small Business and Entrepreneurship, has urged President Bush to encourage the SBA to step up its efforts.
“The administration has failed to listen to my warnings in the past,” Kerry said. “My hope is that they’ll see the desperate state small firms are in and take steps to inject needed capital into the hands of entrepreneurs, capital needed to pay their employees, stock their shelves and keep the lights on through the holiday season.”