Funding for small businesses

This post is an open letter to President Obama, Governor Strickland of Ohio, and leaders all over the nation who are concerned about small businesses.

While it is well accepted that small business is the backbone of our economy, the definition of small business is a bit fuzzy. Some federal agencies specify that businesses with fewer than 200 employees are classified as small. I would submit that a business with 10 employees has issues that are foreign to a firm with 200 employees. These very small firms, and there are millions of them, are the real backbone, and combined, hire millions of workers across the United States.

These very small businesses are being hit especially hard by the recession. While it is true that many of them would not be in dire straits were they better managed, most are being deeply affected by the 2009 economic climate. They typically have no cash reserves and today are virtually unable to secure bank loans or other financing, and so are having to lay off employees or consider closing their doors. These businesses are not making the news as they are laying off one or two employees at a time.

Many folks who have lost their jobs from large and small companies are  budding entrepreneurs who could create jobs for themselves and others while contributing to the economy, but are unable to secure funding to get started.

So here is my, perhaps naive, suggestion to President Obama and other leaders.

You are currently spending billions of dollars to justifiably shore up some mega companies to prevent the whole house of cards from collapsing. While this is necessary and noble, please, please, don’t overlook the thousands of small businesses that are on the verge of failing. You can help them by making easily available low-interest loans – loans that might even be forgiven should the businesses reach certain economy-driving milestones.

I’m not talking about handouts. Establish criteria that will not result in a bureaucratic nightmare. The criteria should include numbers of jobs to be saved and potential job growth. The criteria might also require that business owners either enroll in and attend business management classes at local colleges, or be supported by approved business advisers, in order to improve their management skills. The funding should be open to new entrepreneurs and existing companies who can prove need in any industry.

Pass the money through local banks, and hold the banks accountable for responsibly distributing the funds to businesses in need who meet the criteria. Money should be distributed over time depending upon a business achieving specified milestones agreed to between the bank and the business owner.

Finally, I would challenge President Obama to immediately convene a very small committee of folks who really understand the plight, needs, and challenges of small businesses to come up with a workable program.