While we are thrilled that the Obama administration has recognized the incredible impact small and micro businesses have on job creation and is taking steps to support these entrepreneurs, we feel it’s not enough and worry that these actions won’t have the impact Obama intends.
By focusing on funding, these policies ignore a crucial element in business success – small business training. Statistics show that more than 50 percent of small businesses fail within the first five years. However, more than 70 percent of the women who go through the Women’s Initiative small business training program are still in business. Getting the fundamental training on starting a small business and continuing mentoring and support is crucial to business success.
While TARP funding is a good idea in theory, many community banks are leery of TARP funds attached to onerous conditions, and others view taking TARP funds as a sign of weakness. By channeling TARP funds through capable nonprofit community lenders, the funds will reach the Main Street businesses needing loans to grow their businesses. And nonprofit organizations like Women’s Initiative will ensure that new business owners who may have a poor credit history and are unable to access funding through traditional banking institutions will be able to access these funds.
In addition, tax credits will not help businesses whose profits have evaporated. Neither do they provide an incentive to a business that is struggling in the current economy to add on another permanent employee.
Funding should go to the network of microfinance and microenterprise development organizations, Women’s Business Centers and local Chambers of Commerce throughout the US, to ramp up management assistance and coaching to help small businesses stabilize and grow. If just 10% of the 24 million very small businesses added one employee, it would create 2.4 million new jobs-- more than the total jobs the Administration claims it has saved since the $787 billion in economic stimulus went into effect.
Those of you who have supported Women’s Initiative over the years know that micro and small business development organizations have proven effective in helping small businesses start, grow and create jobs. The Obama Administration should utilize this community based infrastructure to fulfill its mission to get us out of the Great Recession through small business development and by tapping into our entrepreneurial tradition.