September 10, 2010
By Frank Altman
CNN Money recently ran an excellent article about the dire straits that state economic development programs are currently in, having fallen victim to the recession and state budget shortfalls.
Many of these state programs, which marry private lending with state dollars, are running out of cash, and states can't afford to shoulder the burden on their own.
The irony is that these programs are remarkably successful, cost relatively little to run and create jobs. Like CRF, these state programs also lend to small businesses that can't get loans from banks and other mainstream financial institutions.
Loans from state programs and community development financial institutions like CRF, are a lifeline at a time when small businesses are still struggling to access credit. In the last two years, $40 billion worth of bank loans has evaporated according to bank reports submitted to the government.
What's wrong with this picture? Job growth is the engine that will bring us out of the recession, but right now the economic flywheel is spinning viciously in the wrong direction. Instead, we all need to put our shoulders to the wheel and get things moving in the right direction -- towards job creation.
The Obama Administration has been trying to pass a small business bill for months that would cut taxes and provide loans to small businesses aimed at creating new jobs. Held up in the Senate, the bill would provide a $30 billion lending fund for small and mid-sized banks (assets less than $10 billion) to encourage them to make loans to small businesses. It would also provide $300 million to community development lenders, many of whom are clients of CRF, so that they can get the jobs wheel spinning in low-income communities.
Another bill stalled in the Senate would aid small business and job creation by renewing scores of individual and small business tax breaks. Passage of a tax extenders bill would also provide an additional $5 billion in New Market Tax Credits in 2011 targeted exclusively to businesses located in low-income communities.
CRF leads the industry in identifying opportunities to use the New Markets Tax Credit (NMTC) program to deliver low-cost capital to our lending partners and the small businesses they serve. Just ask Tim Ports, who was able to retain 40 employees and add several more to his fish wholesaling business. I know he would agree that the NMTC loan helped keep his business above water, even during rough seas (pardon the puns).
The NMTC and state programs are great examples of what we can do to create jobs in America. Let's focus on what we know will work to help America's small businesses so they can go about their business of putting people back to work and reconnecting with their vision of the American Dream.
Posted by: CRFUSA