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More Debt is Not Going to Help Small Business

By: Steve Johnson

10/22/2009 - 13 Comments

Obama and company are redirecting TARP money from large banks to small banks and SBA loans to help small businesses.

More debt seems to be Washingtions solution for everything.

But access to more debt is not going to cause small business owners to start hiring again.

The primary problem they are facing is lack of sales, customers and confidence in the market.  Small businesses are unlikely to borrow more money until they have an increase in sales and a clear sign that more investments will grow their business profits.

The real threat to small businesses is the expansion of government, causing taxes to increase and created anti-capitalism policies like minimum wages increases, higher energy costs and healthcare mandates.  

Small businesses don’t need more government programs; they need less government programs, lower taxes and fewer intrusions from government mandates that reduce their ability to profit.

Expanding the SBA program to offer more debt to small businesses is not going to help. Certainly access to credit is important, but not if it comes with bad policies that are more burdensome then without the credit. 

And if credit is too easy to get, then even badly structured business will success to compete with good business models.  Investments will go into businesses that are not truly supported by real consumer demand, which could lead to another bubble that will someday bust.

Even if more credit was the key to small business growth, the SBA loan program has a long history of being as much about social engineering or government central planning then about helping small businesses.  The program is designed to try to control the direction of the economy, which cannot be done by government.

I have personally witnessed several business owners struggle with an SBA loan only to realize that it was not a good financial solution for them.

The Obama administration is trying to show some support of the small business sector, but don't hold your breath. Most of their policies are anti-capitalism in nature and therefore anti-small business, which will continue to lead unemployment higher.

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