"My husband and I are in the exact same situation after 23 years in business. Our employees have had the ability to raise their families and prosper. And now collect unemployment. We have not collected a salary in 2 years, exhausting our savings. We are totally behind on our mortgage, can't pay our bills, soon we will not have money for food. Help" Comment received by Latte Republic on post titled, "The Future looks Bleak for Small Business Owners
After multiple billion dollar bailouts, will Washington do anything to assist recession-ravaged small business owners?
CNN's Stacy Cowley writes, "With bank lending almost frozen and consumer spending down sharply, entrepreneurs foresee a Main Street wipeout if Washington doesn't take action soon to shore up the nation's small businesses."
What are business owners saying? "It's killing us right now. We can't expand, we can't buy inventory; we've had to do everything on credit cards because the banks won't even look at us," said Amy Rhodes, owner of A-2-Z Scuba in Puyallup, Washington. "Every single dime of our $40,000 in profit last year we sunk right back into the business. Now, sales are down, and we're making ends meet out of our own money - which makes it more difficult to pay our mortgage."
Amy Rhodes is not alone. Deborah McQueen of Livermore California told Cowley that "Obama has a great opportunity." Many small business owners like McQueen believe that small businesses can help stabilize the economy if only they had access to low-interest business loans.
Shirley Tan, owner of American Bridal in Burlingame, CA said she feels like she's "watching a domino chain collapsing." Tan cut staff when consumer spending slowed and she has some savings to help sustain the business through a short down period, but she's worried that she may also run out of options.
Many small business owners are shell-shocked that Congress is providing massive bailouts for major Corporations that created the financial crisis while ignoring small businesses that are struggling to survive the recession.
Candidate Obama suggested making direct loans available through the SBA's Disaster Loan Program, which traditionally assists natural disaster victims.
No doubt about it - this is a "man-made" disaster of mammoth proportions. And the very banks that helped create toxic assets are refusing to loan money to the business community.
During the campaign, Obama proposed a small business rescue plan to address entrepreneurs need for working capital. He told supporters, "If we don't act, we'll be looking at scaled-back operations, shuttered shops and laid off workers." And that is exactly what is happening along main street in 100,000's of thousands of cities across America.
Last summer, a Federal Reserve survey revealed that 75% of SBA lenders had tightened their lending standards for small business loans. (minimum 680 credit score among other red tape). In February, an American Express poll revealed that 18% of small businesses could be out of business in six months - twice the August prediction.
The existing FICO credit scoring system is not kind to business owners. Business owners have more credit inquiries and higher credit card balances, due to the fact they can not access traditional business loan products.
In addition, many businesses also have what's called an "accounts receivable." During a recession, many customers fall behind on payments, preventing business owners from making payments on time.
It is estimated that 50% or more Credit Reports have errors serious enough to prevent a borrower from obtaining credit. Now, mix in a couple of late payments, due to a cash shortfall and you have a business that is no longer eligible for a SBA loan.
What can Obama do? Persuade banks to start lending or start cutting small business loan checks directly from the government to help small businesses weather the recession. What happens if banks refuse to make small business loans? Millions of formerly successful small business owners will fail.
Maintaining strong investment in the business community will not only put Americans back to work, but it will assist congress in its efforts to stabilize the economy and rebuild America's faith in the financial industry.
Meanwhile, a number of states, including Washington, are taking advantage of a federal program that extends unemployment benefits for former employees who want to start a business of their own. That's great - as long as existing businesses are not ignored.
Help, I'm already on the ropes:
For small business owners (and former employees) who are already on the ropes: (and millions are) here is a short list of local (Washington) community services that may be able to provide assistance.
Unfortunately, self-employed individuals are not eligible for unemployment benefits or other re-training programs provided by the state or federal government, even though small businesses pay employment security taxes on behalf of their employees. (And, Washington has the best-funded program in the nation).
To date, government has not considered implementing a system to preserve or protect small business owners during severe economic downturns.
Government taxes businesses when the economy is healthy, but it turns its back on those businesses during economic downturns.
If you are self-employed and need assistance with paying utility bills, call the Opportunity Council. There are federal and private emergency energy assistance programs for low income individuals and families across the nation. Please note that they will not be able to schedule an appointment for you until your power or gas is shut off. Unfortunately, they are swamped with requests for assistance.
Self-employed individuals and families who can no longer pay for food should apply for food stamps online at DSHS. If that fails, call or google 211 to locate additional community resources.
If nothing else, you are sending a message to the state and federal government that a large segment of the population is going without community services - not only are they falling through the cracks, they are going under.
211 is a national service (available by phone or Internet) to assist citizens in locating community resources.
If you have fallen behind on your mortgage, please call a HUD approved counseling agency on Monday. You can locate a HUD approved Counselor at the web address below. You may be eligible for a home loan modification.
Finally, if you find a program that provides assistance to the self employed, please post a comment on this article, so other people can find it too. In times like these, hope is the only thing that many people have left.
CNBC AIG Bailout funds go to banks:http://www.cnbc.com/id/29565683 (for some reason, I can't get this link to work - but the article is worth reading).
Money CNN http://money.cnn.com/2008/11/14/smallbusiness/loans_needed_asap.smb/index.htm?cnn=yes&eref=rss_politics
Original Latte post: http://whatcomforum.blogspot.com/2009/02/state-mailed-out-hundreds-of-thousands.html