Tuesday, February 9, 2010

Obama and Small Businesses

In his recent State of the Union address, U.S. President Obama presented a bold, economic initiative to help bolster his nation's struggling economy. Obama proposed making $30 billion available to small community banks so that they, in turn, can make these funds available in the form of credit to small businesses.

From a patriotic standpoint, Obama is worthy of praise in his concern for small businesses, part of the backbone of America. From an economic standpoint, many feel he has missed the boat.

Many bankers and economists agree that the problem in the U.S. economy is not the lack of credit but the lack of demand by small business and consumers. Simply put, Americans are not interested in borrowing money at this point in time. Unsure of their country's economic future, Americans prefer to save rather than spend. Herein lays the problem for small businesses. Their market has shrunk, due to fewer customers. As a result, they cut costs by hiring less and purchasing less from suppliers. At the end of the chain are the businesses that face closure. In order to keep afloat, these businesses attempt to obtain credit to pay their bills. But, these are the high risk customers that the banks don't want. The banks want the solid customers who can repay their loans. After all, banks make money from repaid credit, not defaulted loans.

At this point, the only banks that would require funds from Obama's $30 billion are those holding problematic loans, and they probably won't qualify. Bank regulators are examining records with magnifying glasses. High risk banks will most probably fail, rather than receive federal relief.

Maybe Obama should re-direct his funds. Stimulus funds need to get into the economy right away. Rather than strengthen the banks that are in trouble, strengthen the small business sector. When consumer spending is stimulated, the wheels of the economy will be oiled and the system will move forward.

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  1. Thanks for this contact. You should also note that not all USA and Canadian small businesses are domiciled at home. I am American, my partner is Canadian yet we are based In Indonesia in service to energy ventures; Oil, Gas, Non conventional, and Mining. We actively seek principals from home to offer in their products and services to our combined 40 years experience and activities - presenting solutions to Indonesia. EXIM bank is keen to finance domestic content for export ... jobs created there. Does Canada also have such a program? We have lobbied and are rewarded in that the Gov't of Indonesia has now waived the 10% VAT for our equipment needed for exploration. See the synergy of these two programs in tandem? Send us your product profiles. Thanks for this forum.
    Gary L Powell
    + 62 811 1997 01
    Vila Beta Balikpapan Kal Tim, Indonesia
    / Linked-In   / Plaxo    / Skype  / IM : MS Messenger

  2. Thanks for your comment. The Canadian government, seeking to ease the plight of this important and large sector of the country's business community, has established several stimulus programs through its Economic Action Plan to provide much needed economic relief.

    Read more... http://corpcentre.blogspot.com/2009/09/small-business-less-tax.html

    If you are interested in incorporating in Canada, please visit http://www.corporationcentre.ca/


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