Yesterday, on September 16, 2010, the U.S. Senate approved the Small Business Jobs Act that the Obama administration has been pushing for almost a full year. The bill is designed to help free up credit for small businesses and to incentivize their growth. According to the Associated Press, the bill:
– Launches a new $30 billion loan fund for community banks to encourage lending to small businesses.
– Lowers Small Business Administration (SBA) loan program fees and raises SBA lending limits.
– Increases the percentage of government guarantee on SBA loans.
– Offers $12 billion in tax cuts for restaurant owners and retailers who remodel, expand, or buy new equipment.
– Permits self-employed people to deduct the costs of health insurance for themselves and their families for the year 2010.
Though the bill has the potential to help community banks leverage up to $300 billion in additional loan funds, many question its ramifications. Conservative critics say that the bill encourages risky lending to entrepreneurs who are not credit-worthy while doing nothing to boost consumer demand for small business goods and services. Liberal critics say that the bill doesn’t do enough to help the kinds of marginalized small business owners who need it the most.
Gayle Christiansen, MIT DUSP alumna 2010, spent the first half of this year looking closely at the small business network in Camden, New Jersey. After interviewing sixteen business owners in Camden, she wrote her masters thesis about the need to create better support networks for the city’s small businesses. When asked to comment on the bill and on whether or not it would positively affect small business owners in Camden, Gayle told me she was “optimistically skeptical”:
Most of it [the Bill] I don’t think really applies to small businesses in Camden. They don’t have capital gains and a deduction for cell phones really won’t help that much. Increasing SBA lending levels and the amounts small banks have to lend also won’t matter if small businesses cannot and do not access these funds to begin with…Small businesses in Camden tend to exist outside the radar of mainstream financing. Of the sixteen businesses I interviewed, only one received financing from a bank.
Gayle asked friend and local business owner Adam Woods of Camden Printworks his opinion of the bill and he said, “It beats TARP… That said, I wish there was a distinction between small business and microbusiness… The small businesses with 99 employees are the ones who will get all the loans… Also some of the spending is to reduce fees on loans…nobody cares about the fees, they need to get more people loans!”
Back in January, Gayle interviewed Adam about what it took to start his business. He told her:
If you want to start a small business and you are not a person of privilege, you can’t. You can’t afford to start one. If you’re not a person of privilege, you are not going to be credit worthy either, so the bank’s not going to give you any money. The banks said no because I was like a twenty four year old kid that didn’t own a house. I owned a used car that was worth an eighth of what I needed to borrow. So when the government says they’re going to shore up SBA lending, that’s still discretionary for banks.
According to SBA, businesses with less than 500 employees generate more than half of all private sector jobs in the U.S. Between 1993 and 2008, small businesses generated 64% of all new jobs in the country. But beyond job creation, small businesses play other important roles in cities. Small businesses expand local economic activity, help stabilize neighborhoods, and develop local leaders. They also tend to start-up quickly and stay open through hard times.
In order to further articulate and illustrate the value of small businesses in cities, Gayle Christiansen worked with Colab this summer to create a guide called, “Strengthening Local Economies and Civic Life: The Untapped Power of Small Businesses.”
This guide shows how including small businesses in local economic and civic development strategies can lead to more productive and vibrant cities. The authors draw upon small business development literature and Gayle’s interviews with small business owners in Camden.
Here, we’ve attempted to illuminate the value of these hidden assets by sharing their stories and offering broad recommendations for how to think about small business promotion, growth, and sustainability. This guide is one of several products generated through the Collaborative Thesis Project.Post by Amy Stitely, U.S. Green Hub Program Director at CoLab. Amy works with MIT Master in City Planning students on shaping their academic research to generate practical knowledge about how to build a more equitable economy.