If ever there were examples of inherently political economic decisions, the current recession has brought them out. Take Cash for Clunkers, for instance. Bottom line: $2.877 billion cash pumped directly into car dealerships. Or, how about the home buyer’s tax credit? Bottom line: The housing industry gets a $1.5 billion boost from the $8,000 tax credit first-time home buyers get this year. The credit, dollar for dollar, will be paid to taxpayers even if they owe no tax or the credit is more than any tax owed.
You’ll love this one. Economic stimulus money is being spent to train hairstylists and nail technicians in, for example, the Tampa, Fla. area where the hairstyling industry says there are few job opportunities. But, the funds to learn how to craft a French braid are flowing into local beauty schools, for some more than $1 million this year. Bottom Line: A largesse being lavished on beauty schools and a clip job for taxpayers!
Is it boating’s turn now? Is our industry finally being viewed as politically important enough to get some help? That depends on how you define help. Last week, President Obama called for legislation to: (1) Increase the size of SBA 7(a) loans used for dealer floorplan financing from $2 million to $5 million; (2) Increase the size of SBA 504 loans for purchase/expansion of physical plants from $2 million to $5 million for standard borrowers (supporting a total project of $12.5 million) and from $4 million to $5 million for manufacturers (supporting a total project of $13.75 million); and (3) Increase the size of microloans (loans that can fund daily operations) from $35,000 to $50,000.
The President is recognizing that the recovery will be stunted until credit is available to small businesses like ours. This latest announcement is welcomed, if overdue. But, let’s get real here. To assume that this will have the mojo to actually help us is questionable. So far, the existing 7(a) floorplan loan program has been a bust. Talk about a fiddling SBA program while Rome burned . . . we’ve had a whole string section!
So far, this announcement fails to address the total lack of participation by banks in SBA’s program. In fact, I am aware of only one dealer (Randy Wattenbarger) who commented last August 4 to this blog that he was within 3-6 weeks of getting an SBA- backed floorplan loan. (Note: Since comments to this blog do not reveal email addresses, if you’re still a reader, Randy, please comment again and tell us what happened.)
It’s abundantly clear that if the President and SBA really want this expanded program to go this time, a lot more incentives must be offered to the banks to get them to increase their lending to our industry or to get involved with SBA loans at all. Indeed, even ideas including direct lending by SBA and attractive cash incentives to buyers (“Bucks for Boats”) should be on the table now. It’s time for less politics and more direct stimulation of small businesses like ours.