Posted September 17th 2010 at 4:01 pm by
in Camden, Camden: Small Businesses Transform Place, Collaborative Thesis Project, Perspectives on Current Events, Useful Downloads

Why Small Businesses Matter – Beyond Jobs and Politics

Senate Small Business Committee Chair Senator Mary Landrieu, D-LA, discusses the small business bill. Source: Christian Science Monitor (9-17-10)


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.

Commercial Corridor in Camden. Photo by Gayle Christiansen.

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.

4 responses to “Why Small Businesses Matter – Beyond Jobs and Politics”

  1. Sebastiao Ferreira says:

    When microfinance pioneers started to give credit to small businesses in the 1970s, there was the idea that it was too risky. However, 40 years of experience has shown that the owners of small business are good at paying their loans. Currently, microfinance services reach more than 200 million people worldwide and maintain growth paces similar to cellphones users (Bernhardt, 2009).
    According to the Association for Microenterprise Opportunity (2009) in 2006 there were 24.9 million businesses with less than 5 employees in the US, and this business sector is growing faster than the rest of the economy. However, 95% of micro-enterprises in the US have no access to credit for developing their businesses.
    Let’s see if this initiative of the government can start an experience capable of changing these numbers significantly. It can make a difference for those families that make a living through small businesses.

    Association-for-Microenterprise-Opportunity. (2009). Microenterprise business state-level analysis 2002-2006. Retrieved October 3, 2009 from
    Bernhardt, A. (2009). The microfinance market today. Retrieved December 09, 2009 from

  2. Amy Stitely says:

    Thank you Sebastiao for that information. I went to the Association for Enterprise Opportunity ( to see what their thoughts were on the Bill. As it turns out, AEO helped get the bill passed. According to their blog…

    The Small Business Jobs Package contains many important provisions for microenterprise including long sought-after changes to the Microloan Program. The bill’s highlights include:

    * Increases the amount of a SBA Microloan from $35,000 to $50,000

    * Increases the maximum amount that a SBA Microloan Intermediary can borrow from $3 million to $5 million

    * Allows SBA to waive non-federal matching funds requirements for Microloan Intermediaries and Women’s Business Centers;

    * Creates a $300 million Small Business Lending Fund that would allow CDFI loan funds to access equity equivalent capital at a rate of 2% per year for eight years. These terms will leverage additional investment in small business, particularly in communities hardest-hit by the economic downturn.

    * Creates a three-year SBA Intermediary Lending Pilot Program, through which the SBA will make direct loans to nonprofits for re-lending on to entrepreneurs. The program is authorized at $20 million/year, and is limited to 20 Intermediaries/year. In addition, the maximum entrepreneur loan under this new program is $200,000.

    I, however, still don’t have a sense as to how this money will hit the ground or if it will reach the kinds of entrepreneurs that Gayle knows in Camden. As Gayle said, 15 of 16 business owners she interviewed never took a bank loan. They saved and borrowed from their friends/family. There are structural reasons why this was the case, and I’m wondering if the new bill can help deal with some of these structural impediments.

  3. Karl Seidman says:

    The provisions of the bill that will expand funds form CDFIs and SBA microlending intermediaries are more likely to reach the type of business in Camden that Gayle studied. It is true that many of these firms don’t access conventional sources of capital, but relying solely on family and friends for financing can limit a firms growth and it may encourage them to rely more on credit cards or other high cost sources of debt. To reach and engage these type of small businesses, it is often critical to have a business development organization on the street to reach out to these businesses, build their trust and help link them to other resources. In some cities, there are CDCs and other non-profits that play this role, but there is not a federal program that directly supports this function. Some cities use CDBG funds and local foundations to fund this work. Massachusetts has a state grant program to support non-profit business development entities.

    I recently gave a talk on the components and financing of a neighborhood level economic development system as part of a conference in Portland Oregon–here is the link to my slide:

    A federal policy to support small businesses as part of national recovery strategy needs to address the full ranges of businesses, not only the neighborhood scale that Gayle focused on in Camden. There is also a need to address innovative and high growth small firms that are developing products and services that serve larger markets and are thus more likely to create many jobs. The credit programs under the Obama bill are somewhat helpful here but there is also a need for research and development funding and patient equity capital that helps support these type of firms. Most conventional venture capitalists no longer serve these many of these firms. A federal program to help fund regional scale venture capital and R&D initiatives linked to critical regional industry would be an important step to strengthen regional economic development and the nurturing of high growth small businesses. A companion workforce development initiative could then help train unemployed and underemployed workers for emerging occupations within these industries.

  4. David Krauter says:

    I totally agree with Amy, whether this money will ever reach entrepreneurs.

    Most entrepreneurs I know see banks as evil and bypass this system to create quick cash flow without all the restrictions.

    Not sure if this bill will aid and support the real entrepreneurs who create jobs and are responsible for the majority of employment around the world.

    Be interesting to see the development of this bill, and what effect it will really have.


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