It’s ironic that it takes the CEO of a business as large as Starbucks to draw attention to one of the biggest issues facing small businesses.
Today, Starbucks CEO Howard Schultz will launch “Create Jobs for USA,” a program where a $5 donation at any Starbucks will provide $35 in financing for small businesses. This is real money that will be loaned to small businesses to create real jobs — something our economy desperately needs right now.
Schultz knows our economic recovery depends on small business success. His program asks the American public to stand behind his efforts to remind lawmakers of the unique potential small business holds. With someone this high profile taking action to put small employers back on the hiring track, hopefully the problems small businesses have accessing credit will get some much needed attention. Schultz’s work should be applauded, and imitated. We hope leaders of all stripes are listening to what he is saying: small businesses can’t get credit.
Small employers are struggling; lack of demand and weak sales are part of it, but one of the key barriers to their success — hindering their ability to help remedy the economy’s malaise — is the inaccessibility of credit. Take Laurie Lay, for example. Business was booming for her Richmond, Virginia restaurant, but every restaurant has its slow season. So when a community bank approved her request this year for the $12,000 loan that would keep her doors open, Laurie was ecstatic. To her dismay, funding that the bank expected in August didn’t come through. Come September, Laurie had no choice but to close her doors. Less than a week later she got word from the bank: they’d finally been able to round up private funders to allocate the loans they’d approved for small employers like her. But for Laurie, it was too late.
A recent Pepperdine poll found just 44.5 percent of small business owners who sought loans in the past year were able to obtain them. What’s more, 34.8 percent of respondents agree that of all the policies with potential to create jobs in 2012, increased access to credit is the most likely to do so.
Most of the time, it’s not large million-dollar loans we’re talking about. Small business owners with stellar credit and long-standing businesses can’t secure small loans to help them hire the extra person they need to keep up with demand, or manufacture that next batch of inventory, as is the case for Lee Erickson. Lee’s company, VRX, makes electronic loss prevention products in Maryville, Tennessee. All he needs for each round of product is $20,000 — and four banks turned him down. Luckily for Lee, he can afford to pay for production out of his own pocket. But he wants to expand VRX, and until he is able to get that extra cash boost, he won’t be able to. How can we expect small employers like Lee to create jobs when the credit climate puts a ceiling on their basic ability to do business? Small businesses need room for growth.
With all that said, Congress has worked to give small businesses a hand when it comes to accessing credit. Lawmakers passed the Small Business Jobs and Credit Act last year, which included a $30 billion lending program to help small businesses get credit. Unfortunately, the lending fund wasn’t able to allocate the majority of its funds, and many small businesses continue to struggle.
Just because the fund didn’t fully deliver, should lawmakers give up? When it’s been a rough week and his Friday morning espresso doesn’t stretch through that after-lunch slump, does Howard Schultz call it a day? Of course not. It’s been a long recession, and sometimes it takes more than one shot to fix something in need of a major boost.
Fresh lending policies and programs like Howard Schultz’s are crucial. It will put much-needed cash in the hands of America’s small businesses so they can grow and hire, creating new consumers, which will further stimulate the economy. And with the public awareness the fund aims to generate, small business lending should become a greater priority for lawmakers as they work to pass a jobs plan. The 14 million unemployed Americans, the countless struggling small businesses and our floundering economy need the help, and they need it now.
To help keep small businesses aware of the loan options that are available, Small Business Majority is working to educate entrepreneurs about the various programs and resources in the credit arena. Yesterday, we kicked off “30 Days of Access to Credit,” an online webinar series. Our discussions will provide state-specific information on lending, and are designed to prompt discussion around robust policies that can help give small businesses a much-needed credit jolt. For information on these seminars, click here.