Small businesses need tools to create jobs

By Karen Mills

The message from President Barack Obama is clear: We must give small businesses the tools they need to create the jobs America needs.

Small businesses are the biggest engine for job creation, having created nearly

65 percent of the net new jobs over the last

15 years. However, in this tough economic climate, small businesses still face tightened credit and other obstacles that have hurt their ability to grow. Solving these problems is a central piece of Obama's Jobs Plan.

First, small businesses need tax incentives to create new jobs quickly. That's why the president proposed a temporary tax credit of $5,000 per new hire and additional reimbursements for wage increases for more than a million small businesses. The credit would be put in their hands every quarter, encouraging them to make those hires now.

He also has called for eliminating capital gains taxes on small business investments and providing other tax incentives.

Second, we should offer smaller banks the additional capital they need to expand their small business lending. To do that, the president proposed a $30 billion Small Business Lending Fund designed to provide incentives for community and smaller banks to increase their lending to creditworthy small businesses.

As proposed, this fund would be structured in a smart way: The more a bank increases its small business lending, the lower the rate it will pay on its capital – as low as

1 percent.

For small banks that with just a little more assistance would take more risk in lending to viable small businesses, we've asked Congress to extend the successful Recovery Act provisions for Small Business Administration loans.

Through these provisions, SBA waived fees and increased the government-backed guarantee in our largest loan programs. Over the past year, this has resulted in $20 billion in loan support for tens of thousands of small businesses across the country – filling a market gap in lending caused by the recession.

With funds running out this month, the president has called to extend these provisions through at least September. In addition, he has asked Congress to permanently increase the size limits in these loan programs.

But we can't stop there.

On Feb. 5, Obama announced two additional temporary changes.

The first would raise the cap on SBA's “express” loans, which give small businesses the working capital to restock inventories and increase sales. Express loans use the bank's own paperwork to approve loans quickly. The president wants to increase the limit on these loans from $350,000 to $1 million.

The second change would help small businesses that occupy their own commercial real estate. Even profitable small businesses that are making payments on time might have trouble refinancing and face foreclosure.

Allowing these small businesses to refinance through SBA's “504” program would help them lock in long-term, stable financing, saving businesses and saving jobs. Notably, allowing 504 refinancing also will help banks gain more room on their books to make even more small business loans.

Finally, we should provide targeted support to the most innovative small businesses, including those with the potential to export American products all over the world.

All of these proposals meet pressing needs in America's small business community, which employs more than half of working Americans.

If combined in a comprehensive jobs bill, they would stimulate our economy and give taxpayers a strong bang-for-the-buck.

Now is the time for all of us to work together to give America's 27 million small businesses the tools to create jobs and lead us to recovery as they've done throughout our nation's history.

Karen Mills is administrator for the U.S. Small Business Administration. Contact her through the SBA's Web site, www.sba.gov/