Lending crisis over? Not for small businesses…

I received a call this week from a small business in Anderson, South Carolina.

The lady told me that their 30+ year family cabinet-making company had fallen on hard times due to the economy and needed a loan to stay alive. Their attempt to get an SBA loan from the usual banks had failed because their business was not deemed a good risk.

It might actually be too late to save this small business. Had they sought some help earlier through a Small Business Development Center and applied for a SBA loan earlier, things might be different.

However, there are thousands of other small businesses across South Carolina and hundreds of thousands across the country that need a loan or line of credit, not just to keep them going until the economy turns, but also simply to serve their existing customer base and even to expand to meet new demand.

But like this cabinet maker business, the response most are getting from local financial institutions is the same—No.

This is why the Senate vote scheduled for the week of September 14th to allow debate to begin on the Small Business Jobs Act (SBJA) is so critical. The legislation will create a $30 billion Lending Fund for community banks that economists say will turn into $300 billion in small business loans.

Sen. Landrieu (D), LA

Senate Democrats believe they have at least one or two Republicans who will vote for cloture to move the SBJA forward.

The big banks and their hired gun, the U.S. Chamber, have failed in their fear tactics to convince Senate Democrats and the public that this bill is a small bank bailout or TARP 2.

The truth is that the Lending Fund is designed to actually bring in one billion dollars to the federal government. And while big banks are viewed negatively by the public, who doesn’t want their local community banks to succeed?

So don’t be surprised if the SBJA opponents don’t have another trick up their sleeves—to convince the GOP Senators who might vote for SBJA cloture, as well as the public, that the Lending Fund isn’t necessary.

Here are some of the headlines appearing in the business and mainstream press (or the “MSM,” as Columbia, SC political blogger Brad Warthen refers to the mainstream media) this week:

“Banks loosen credit to small firms, Fed survey says”
“Fed says banks easing lending standards for small business for first time since late 2006”
“Big banks loosen lending standards”
“Fed survey finds easier business lending standards”
“Green Shoots at Last: Small business lending finally starting to thaw”

Get the picture? In the mass media, the story being propagated is that the crisis is over — that big banks have come to the rescue of small business, and that loans are flowing. “Good times are here again,” supposedly, and “we don’t need no stinkin’ Lending Fund” for those community banks.

That’s not the story we’re hearing here on Main Street USA.

You can bet that this “good news for small business” Federal Reserve survey is being put in front of every Senator — and in particular, every Republican Senator — in hopes that the latter will continue to vote against cloture for the SBJA.

Now, I have no way of knowing if the big banks are telling the truth that they are easing up on lending standards for small businesses. But that’s really the only thing this “survey” is reporting — lending standards are changing, not the actual granting of small business loans.

And when the big banks do report — as they did at the end of July — that they are making more small business loans, go and ask them for their definition of a small business.

If they count businesses with up to 250 or 500 employees in their loan numbers, then they aren’t reaching the real small businesses of this country — those like our cabinet maker with 100 or fewer workers that account for about 98% of all businesses.

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