Hey Obama!!!

From the desk of:

Rich Storey
Mortgage Advisor
615.260.8028

Credited to: www.CNNMoney.com

Message to Obama: Send loans fast
What can Washington do to help small business owners save jobs and keep spending? Exactly what the president-elect promised during the campaign.

(CNNMoney.com) -- What could jump-start the economy? Affordable loans for small business.
With bank lending almost frozen and consumer spending down sharply, entrepreneurs foresee a Main Street wipeout if Washington doesn't take action soon to shore up the nation's small businesses.

"It's killing us right now. We can't expand, we can't buy inventory; we've had to do everything on credit cards because the banks won't even look at us," said Amy Rhodes, owner of A-2-Z Scuba in Puyallup, Wash. "Every single dime of our $40,000 in profit last year we sunk right back into the business. Now sales are down, and we're making ends meet out of our own money - which makes it more difficult to pay our mortgage."

In a mid-October campaign appearance, then-candidate Barack Obama proposed a "small business rescue plan" to address entrepreneurs' need for working capital. "A credit crunch has dried up capital and put these jobs at risk," Obama said at the time. "If we don't act, we'll be looking at scaled-back operations, shuttered shops, and laid-off workers."

The situation has since grown grimmer. The Federal Reserve's recent Senior Loan Officer Opinion Survey found that 75% of the banks surveyed had tightened their lending standards for small-business loans. For the first time in six years, payroll giant ADP reported a net loss of jobs among small companies; its monthly index estimated 25,000 positions were shed in October. And a survey conducted by American Express Open last month found that 18% of small business owners polled say they could be out of business in six months -- twice the August prediction.
So what should the government do? Exactly what Obama pledged, small business owners say: Persuade banks to start lending, or start cutting loan checks directly from the government.
In October, Obama proposed temporarily suspending the fees the Small Business

Administration changes for participation in its flagship loan-guarantee programs, which insure banks against losses on a portion of the money they lend to qualifying small businesses. But he also suggested making direct loans available through the SBA's Disaster Loan Program, which traditionally assists natural-disaster victims.

"I would prefer direct lending from the government, if they could pull that off," said Rob McNaughton, owner of online fashion retailer Rob Diamond in Denver. "I feel like the banks don't like to do SBA loans. It's a lot of paperwork.

The SBA's 7(a) loan-guarantee program backed 30% fewer loans in 2008 than it did in 2007, and fewer banks are making those loans. SBA watchers attribute the decline to the growing expense of complying with SBA requirements and subtle changes to the program's mission.
"The root of the problem is that the SBA has raised its credit standards over the past decade," said Joel Pruis, director of advisory services for Baker Hill, a financial-services consultancy. "The differential between what's acceptable without the SBA guarantee and what's acceptable with it has narrowed significantly. We've got very few loans now that fit in that gap. Then, the operating costs related to the program are burdensome - small banks often have to hire a full-time employee that knows the SBA. It's not a program you can dabble in; you either have to get all-in or not do it at all."