SANTA BARBARA – “It is encouraging that President Obama, in his State of the Union address, acknowledged the important role that small businesses play in our economy, says Marsha Bailey President & C.E.O. of Santa Barbara based Women’s Economic Ventures.
For every one job created by big business in California; small businesses create six.
In the last recession small business in California grew by nearly 1 million; creating over 600,000 jobs.
And the boost in tax revenue generated by small business activity is significant. Federal taxes from sole proprietorships increased by over $40 billion between 2000 and 2005. And in the U. S. overall, women business owners alone generate $3 trillion in annual economic impact and provide 23 million jobs. Locally, WEV estimates that its client businesses created 331 jobs during 2008. That’s nearly a job a day for every day of the year.
While it is true, as the president says, that some small businesses are poised to grow, many more are struggling to survive. Access to capital, training and business consulting are key to the success of these businesses.
His pledge of $30 billion to community banks to lend to small businesses is welcome, but a portion of that money must go to Community Development Financial Institutions (CDFI) like WEV in order to reach a broader range of small businesses.
WEV provides both loans and extensive training and support to entrepreneurs in both the start-up and growth phases of their business.
CDFIs lend to start-ups and pre-bankable businesses that banks cannot or will not lend to because of the inherent risk and because small loans are not profitable. Last year
CDFIs asked the U.S. Treasury for over $400 million in capital and capacity-building funds. Only 25% of the proposals were funded because of limited funds.
Banks will continue to be hamstrung by tight regulatory policies that require them to set aside higher and higher loan loss reserves for loans that the Federal Reserve deems high risk. CDFIs, which are usually non-profit, non-depository entities are not faced by the same constraints as retail banks which must safeguard their depositors’ funds. WEV has loaned over $2 million to borrowers who could not qualify for regular bank loans. Our approach of providing a continuum of business training and support, including our core Self-Employment Training program to our clients is particularly valuable to their success.
With regard to President Obama’s call for tax credits for job creation and a repeal of capital gains. Businesses pay taxes on profits. While tax credits are an after-the-fact benefit, they do not provide the credit and cash flow that businesses, especially small ones, need in order to hire new employees.
The recession has made it harder for WEV and other non-profits to secure funding from corporate, foundation and individual donors. In times such as these, government support needs to increase in order to maintain services that are even more in demand. The suggestion of a freeze in spending for domestic programs is premature and could hurt the very programs, like WEV, that are helping individual entrepreneurs create jobs.