At the hearing, several small-businesspeople testified that this lack of lending is putting their abilities to employ additional workers in jeopardy. The recession is supposed to be over, but unemployment is still high, and the freeze in small-business lending might be a big reason.
Two main solutions emerged that the Democrats in
The president's stimulus plan increased the amount of a bank loan to a small business that the SBA may guarantee--from 75 or 85 percent up to 90 percent.
Another witness was
So the policy the small-business owners recommended, along with Zandi, was to increase the amount the SBA can guarantee up from 90 percent to 95 percent (or higher) and from
But critics of the SBA, like economist
She also said that, despite the anecdotes of those who testified at the hearing, in general small businesses are not trying get financing or expand their businesses due to the uncertain economy. "They're insecure about what's going to happen," de Rugy said.
2. Tax incentives.
Zandi also mentioned a jobs tax credit as a way to shore up employment among small businesses. It would be a tax incentive for each employee hired. Some economists are concerned that a tax credit wouldn't work fast enough to reduce unemployment. So Zandi suggested a model for any tax incentive program: cash-for-clunkers. The money to trade in a car was only available for a short amount of time. Zandi's idea was to strictly limit the length of the tax incentive so businesses will cash in right away. Some of the senators at the hearing seemed eager to restrict the tax credit to only small businesses. But Zandi said that throwing in additional strings like a maximum number of employees would only dissuade businesses from taking the credit. "If you limit it by business size, it gets too complicated," he said.
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