Landover, Md. – Entrepreneurial pioneers embody the spirit of possibility, the tireless work ethic, and the simple hope for something better that lies at the heart of the American ideal. And they have always formed the backbone of the American economy.
After all, Hewlett Packard began in a garage. Google began as a research project. And McDonalds started with just one restaurant.
Over the past decade and a half, America’s small businesses have created 65 percent of all new jobs in this country. And more than half of all working Americans working in the private sector are either employed by a small business or own one – more than half.
These companies fuel our prosperity. And that is why they must be at the forefront of our recovery.
The problem is, our small businesses have been some of the hardest hit by this recession. From the middle of 2007 through the end of 2008, small businesses lost 2.4 million jobs. And because banks shrunk from lending in the midst of the financial crisis, it has been difficult for entrepreneurs to take out the loans they need to start a business. For those who do own a small business, it’s been difficult to finance inventories, make payrolls or expand if things are going well.
That’s why we made sure the Recovery Act focused on helping small businesses. In it, we temporarily reduced or eliminated fees on SBA loans – loans that give small businesses more money to reinvest in their own futures. And we guaranteed some of these loans by up to 90 percent, which has given local banks and credit unions the confidence they need to lend.
So far, the Recovery Act has supported over 33,000 loans to small businesses that have already helped save or create nearly tens of thousands of jobs – nearly $13 billion in new lending. More than 1,200 banks and credit unions that had stopped issuing SBA loans when the financial crisis hit are lending again today. And more than $4.3 billion in federal contracts is now going to small businesses.
We’re also providing tax relief to small businesses under the Recovery Act – relief that will give these businesses back over $5 billion this year. And we’re giving tax cuts directly to 95 percent of working Americans, which includes the vast majority of small business owners and their employees.
But there’s still too little credit flowing to our small businesses. There are still too many entrepreneurs who can’t get the loan they need.
And that’s why today, we’re announcing new steps to support more lending to America’s small businesses.
The first thing we need to do is increase the maximum size of various SBA loans. So I am calling on Congress to increase the cap on what’s called 7(a) loans to $5 million. These are the loans most frequently handed out by the Small Business Administration to help folks open their doors and buy machinery, equipment, land and buildings.
We also need to increase the maximum size of what’s called 504 loans to $5 million. And we should also increase the maximum size of microloans that go to start-ups and other smaller businesses.
Today, we’re also taking additional steps to boost credit for small businesses through our Financial Stability plan. The major banks that were in critical condition a year ago need no new assistance from the government, and so we are winding down that portion of the TARP program. But to spur lending to small businesses, it’s essential that we make more credit available to the smaller banks and community financial institutions.
Under the new steps we’re announcing today, if these institutions put forth a plan to increase lending to small businesses, we will help them get the capital they need to do it at rates that are more affordable than the ones offered to our largest financial institutions. And we will make capital even more affordable to the community development financial institutions that focus on providing credit to America’s small businesses in our hardest hit rural and underserved communities.
Of all the steps we’re taking to move this economy from recession to recovery, I continue to believe that the success of our small businesses will be a foundation upon which our future prosperity is built.
Edited from remarks made Oct. 19 at Metropolitan Archives.