Making government work for business

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Across Michigan and the nation, our small businesses are struggling under a dual burden. The economic downturn that has cut into demand for goods and services would be quite enough to contend with. But even businesses with willing customers and demand for their products face another challenge: lack of access to credit. I'm hopeful that Congress will act soon on legislation I believe could help make capital more available.

The difficulty of finding bank financing is both a symptom and a cause of our economic troubles. The crisis that nearly toppled our economy in late 2008 and early 2009 was largely the result of a shutdown in lending by banks worried that they would be overwhelmed by bad loans. And as the lack of available credit rippled through the economy, it hit more businesses, cost them more customers, forced them to lay off more workers, and slowed economic activity even more, making banks all the more reluctant to lend and setting off a downward spiral.

The search for solutions to these problems has been intense, and we've taken some steps in Congress to alleviate them, including acting to reduce Small Business Administration lending fees, increasing the dollar amount of those loans the government would guarantee, and offering short-term loans to businesses facing immediate financial hardship. But it hasn't been enough.

In May, I told members of the Senate Small Business and Entrepreneurship Committee, on which I serve, of just one Michigan example of the problem: A small manufacturer based in the Thumb. The company's longtime bank lender told the company it could not renew the firm's five-year loan, instead offering 90-day renewals at a much higher interest rate. The company, with 77 workers and 150 customers, sought a loan elsewhere, but other banks 28 of them rejected its application. That story can be repeated 100 times throughout the state.

Convinced of the need to do more, I recently co-sponsored the Small Business Access to Capital Act offered by Sen. Mary Landrieu of Louisiana, who chairs the Small Business Committee. Sen. Landrieu's legislation, which would implement several small-business proposals that President Obama has put forward, would increase size limits on several SBA programs that guarantee loans to small businesses. That's especially important to capital-intensive businesses such as Michigan's small manufacturers, who often find the current limits on SBA loan guarantees prevent them from finding the capital they need to invest and create new jobs.

In announcing his proposals, the president made clear that while the American Recovery and Reinvestment Act has provided important help to small businesses, we have much work left to do. "There's still too little credit flowing to our small businesses," the president said. "There's still too many entrepreneurs who can't get the loans they need to open up their doors and start hiring. There's still too many who are struggling to make payroll and to stay open. And there's still too many successful small businesses that want to expand further and hire more but just don't have the capital to do it."

The most significant provision in the legislation, especially in Michigan, is the increase in loan caps on SBA's biggest lending programs. The 7(a) loan program, SBA's largest, now caps loans at $2 million; the proposed bill would increase that to $5 million. The loan cap on the 504 loan program, which makes loans for real estate and other fixed assets, would rise from $2 million to $5 million for most borrowers, and to $5.5 million for manufacturers.

These enhancements to the SBA program are critical to many small businesses, including our state's manufacturers. Given the large investments in plants and equipment that even small manufacturers must make, access to capital is essential. But businesses such as auto parts manufacturers have traditionally been locked out of the SBA loan program due to lower loan caps. By raising the amount that these businesses can borrow through the program, more small businesses will be able to finance the equipment, raw materials, and staffing that they need to survive and thrive, to protect the jobs they already provide, and to provide new ones.

President Obama outlined a number of additional important steps, including making low-cost capital available to small community banks so those banks can in turn support small businesses; and directing Treasury Secretary Tim Geithner and SBA Administrator Karen Mills to convene a conference where they will hear the best advice from lenders and small businesses on improvements to programs. I support those ideas. We need to search constantly for good ideas that can help our entrepreneurs succeed, our small businesses thrive, and our economy recover.

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EDITOR'S NOTE - Carl Levin, a Democrat, represents Michigan in the U.S. Senate.