Is it time for the small-business initiative?

July 29, 2010

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A small-business initiative working its way through Congress has been making headlines lately. It has the potential to provide $30 billion in new capital for community banks, which would use it as a foundation for lending to small and medium-sized businesses. Whether lawmakers will pass the bill is the main question.

I have a different question: What do you think? Do you want or need a loan right now?

At the risk of oversimplifying things, let’s say the typical markers of a recession are high unemployment, low consumer confidence, low consumer spending, and low business output. A perfect economic policy would put the jobless back to work, thereby rebuilding consumer confidence and kick-starting consumer spending, which would rev up the engine of business.

The government doesn’t have a perfect economic policy at its disposal. In fact, other than creating new positions and hiring people to fill them, the government doesn’t have any way to put the jobless back to work directly. It can do so indirectly by ordering some domestically made goods (for example, some government cars or an aircraft carrier or something like that) or by funding infrastructure (new or repairs).

How else can the government encourage consumers to spend? It has quite a few additional ways. For example, the stimulus package (the American Recovery and Reinvestment Act of 2009) provided federal tax cuts; expanded unemployment benefits; and increased spending on education, health care, and infrastructure. It’s hard to say if the stimulus is working, or how well, but we do have some signs of hope. The PMI has been higher than 50 for nearly a year; capacity utilization in many industries has been on the rise for almost as long; and consumer spending on durable goods has been on the rise too. On the other hand, the unemployment rate isn’t falling very fast at all, and consumer sentiment is improving slowly at best.

So let’s set the data aside and go straight to the source. Anecdotal evidence says that many fab shops are busy, but how busy? If funds were available for borrowing, would you head to the bank for a loan to buy some equipment, or is demand for your products not strong enough yet? In other words, how good or bad is the timing of the small-business initiative? Call me at 815-227-8262 or send me an e-mail (ericl@thefabricator.com). I’d love to hear your thoughts.


FMA Communications Inc.

Eric Lundin

Editor
FMA Communications Inc.
833 Featherstone Road
Rockford, IL 61107
Phone: 815-227-8262
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