New Law Will Give Small Businesses Better Access to Credit and Spur Job Creation
[CHICAGO] – Illinois small businesses will receive a much-needed lifeline that will improve their access to credit and jumpstart job creation following passage of the Small Business Jobs Act, U.S. Senator Dick Durbin (D-IL) and U.S. Representative Melissa Bean said today. The legislation, which President Obama will sign into law on Monday, provides incentives for community banks to extend small businesses the capital they need to grow their businesses and hire additional workers, as well as $12 billion in small business tax relief.
“Countless small businesses are struggling to stay afloat, while others are ready to expand if we can provide them with the seed money to get moving. They desperately need access to credit in order to grow and hire more aggressively. Small businesses are the economic engine of this country and the key to a true recovery. We need to get these programs in place quickly. A jobless recovery is no recovery at all,” Durbin said.
“This is one of the most important measures we have passed this year, in terms of supporting economic recovery,” Bean said. “During my Small Business Federal Resource Seminars, community business owners have told me that lack of access to affordable credit remains the biggest obstacle to business recovery, expansion and diversification. This legislation will help bridge that gap and is critical and timely to sustaining our economic recovery and creating jobs.”
“If you own a restaurant, you have to pay for rent, utilities, staff, and the food you prepare before your customers walk in the door, and that requires access to credit. Yet the Treasury Department reported last December that the 22 big banks that received the most assistance from the taxpayers since the onset of the financial crisis have cut their small business loan balances by a collective $11.6 billion since last April. With the big banks using their money for bonuses instead of small business lending, this bill creates stronger incentives for smaller banks to step in and lend to worthy borrowers,” Durbin said.
Small businesses have historically led job creation during economic recoveries, and over the past 15 years, small businesses have created two-thirds of all jobs. Between 2003 and 2006, small businesses in Illinois created a net increase of over 141,000 jobs—over 90 percent of the net jobs created during that time period. Still, only half of all small businesses that tried to borrow last year got all or most of what they needed, according to a survey conducted by the National Federation of Independent Businesses.
Through a combination of tax credits, enhancements to SBA lending programs, and the development of new community bank lending facilities, this bill will provide small businesses with the resources they need to start, continue, or expand operations, creating jobs and generating economic recovery in the process.
The Small Business Jobs Act:
- Creates a $30 billion fund that community banks can access to borrow cheaply and then lend to small businesses profitably. The fund is limited to the smallest banks, with $10 billion or less in assets, and will be linked to performance-based standards to incentivize those lenders that extend new credit to small businesses (decreasing the dividend rate banks pay as they increase small business lending);
- Extends several of the successful loan programs initiated by the American Recovery and Reinvestment Act that have helped small businesses create or retain more than 700,000 jobs over the last two years;
- Provides small businesses with $12 billion in tax relief to encourage innovation, expansion, and job growth. These tax breaks include an extension of provisions from the Recovery Act that promote investments by allowing small businesses to write off new purchases and startup expenses more quickly; and
- Makes several improvements to existing SBA programs, such as waiving loan fees for small business borrowers and increasing the loan guarantees for community banks that want to lend. The bill will also increase loan limits for SBA 7(a), 504, and microloan programs and allow small businesses to use some of these loans for refinancing existing operations rather than just new equipment purchases.
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