Las Vegas Sun

March 29, 2024

Small Business:

Small companies not pulling out of recession same way as larger corporations

Karen Mills

Karen Mills

Karen Mills, administrator of the U.S. Small Business Administration, told members of the Las Vegas Chamber of Commerce last week that although the economy is recovering, small businesses are not rebounding like larger companies.

“I am seeing an economy that is coming back much more slowly for small business than big business,” said Mills, who spoke June 8 at a chamber luncheon at the Four Seasons. “Small businesses have suffered much more in the credit crunch.”

Las Vegas is an important small-business community that has been especially hard hit, Mills said. Helping them is important because 65 percent of the jobs created in the country will come from small business, she said.

“If we are going to come out of this recession and continue this path to recovery and if we are going to be competitive for a long time in this global economy, it is because we have small businesses that are healthy and vibrant and growing,” Mills said. “It is not the government that is going to be creating jobs that lead us out of this recovery. It is small business, and it is our job to give you the tools you need to do it.”

Mills said that although one national survey showed small businesses were pessimistic about the recovery, businesses are more upbeat than they were a year ago.

“When I was out traveling last year we heard from businesses that if they didn’t get a loan, they weren’t going to make it through,” Mills said. “Now, they are saying they need a loan to buy inventory and take advantage of opportunities.”

Nationally, Mills said the volume of SBA-backed loans in 2010 has surpassed 2008’s volume, after dipping in 2009, but Las Vegas hasn’t rebounded as other markets have. Still, Las Vegas is up 29 percent over 2008, she said.

The SBA is working with the Treasury Department to ensure small community banks have access to capital so it can be loaned to small businesses, Mills said.

There is legislation pending in Congress that would maintain the 90 percent loan guarantees of the SBA, ensure the program has enough money and even increase loan limits, she said.

“We are not out of the woods yet, especially when it comes to access to capital,” Mills said.

She said she knows small businesses have been frustrated with the inability to get loans, and the SBA talks with banking regulators about that problem. Banks are told by regulators that they shouldn’t lend money to someone who isn’t credit worthy, and that has made them cautious, she said.

The good news is that more lenders are getting involved with SBA lending program again, she said. Since 2007, 1,200 community banks have returned to SBA lending, she said. As part of the stimulus package approved in 2009, the SBA guarantees 90 percent of the loan. SBA guarantees were cut at the end of the Bush administration, she said.

“We are seeing lending come back,” Mills said. “There are pockets where it has not, but we are going to keep pressing and working with regulators to help creditworthy small businesses.”

In response to one question, Mills said the Small Business Administration has no plans to do any direct lending after studying the matter. It has more than 5,000 banks as partners that can better reach potential customers, she said. It would take time to develop such a lending system that would cost 15 cents on the dollar compared with 1 cent on the dollar today.

In addition to helping small businesses through SBA-backed lending, Mills said the stimulus package has resulted in 29 percent of the contracts awarded in it to go to small businesses and that number is expected to increase. That legislation also has tax relief for small businesses such as accelerated depreciation and the ability to carry back losses five years instead of two. That has allowed companies to get a refund on their taxes, she said.

The federal government has given capital gains tax breaks to those who want to invest in small businesses; and companies that hire those who have been unemployed for two months or longer receive $1,000, Mills said.

The new health care bill will also give a 35 percent tax credit for small businesses with fewer than 25 employees.

One questioner asked Mills if the government can do more to help stimulate sales similar to its cash-for-clunkers program that helped spur the auto industry last summer.

Mills said that there are no plans for such a program to help small businesses because the government is constrained by what it can spend and needs to keep its deficit in check. The focus is on programs that improve the overall economy, she said.

“More people will walk through your door and buy goods if the economy is going again,” Mills said.

Mills encouraged small businesses to have an adviser working with them whether it is a paid consultant or advisers through the SBA. Expert advice makes a difference in helping small businesses improve sales and profits and give them the ability to hire more people, she said.

“We know these resources are important to small business to help them understand where they are going next, where they are making their money and how to navigate in changing times in a world changing around them,” Mills said.

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