The Economic Package & Small Business

Today I spent some time researching the Economic Recovery Package or Stimulus Package as we know it. Thanks to our government, with this bill, business owners were given a few chances to recuperate in this recession.

However, because the final decisions sometimes rest with different entities, we are beginning to see minor problems arise.

If you are a frequent reader of this blog, you remember that I blogged about the ARC loan earlier. To remind you, the ARC loan is the $35,000 loan created for struggling small businesses by the government in partnership with the Small Business Administration. With this loan, the Small Business Administration guarantees the loan 100%, the business owner does not have to pay on the loan until a year after receiving, and the small business owner gets help with credit card debt, payroll, or whatever need taking precedence at the moment.

Problem One: "The Bank." The loan has to be approved through the banks and banks are still hesitant. Bankers are still awaiting "banking guidelines" and upper-level skepticism is being filtered down. Banks think, "a program where we don't get paid for a year?!" "And if a business needs this money in the first place, they must be doing something wrong to begin with. Is this who we want to lend to?" They forget that some legitimate small businesses may need cash flow for a pressing need, may not want to use the cash they have set aside to pay bills, may not be in the financial frame to pay back any cash borrowed in less than a year, so a loan with no repayment until after a year could be the tool they were awaiting to keep their business afloat.

To most banks however, this seems ludicrous. After all, banks are in the business of making money first, then perhaps finding a compromise to helping struggling small businesses.

The ARC loan however is not the only Recovery Act problem. Stimulus money has now been released to various states. Among other things, the money stems to help create jobs, enhance the green movement, help small businesses, train people for more skilled employment, help the disabled, aid veterans, and help to educate and train youth.

Problem Two: states have the ability to control the placement of these funds. So each state now establishes their criteria and if you're in a conservative state....well, the criteria is most likely stringent.

For instance, some states are targeting entities that have already been state-funded. While this is not necessarily a bad thing, the one downside is that you have the same "old" programs and methods and "change" entities may not stand a chance in receiving funding.

Also, funds are being directed to non-profit institutions or educational institutions. So a for-profit green consulting group who may want to enhance their programs to educate more people and host workshops for companies and may think that Stimulus aid could be a way to do this, will learn that they are not eligible for this money.

While you savor this thought, think that one of the number one reasons for small business failure is lack of capital. So with the credit markets being tight for small businesses, plus the Stimulus package being tightened for some small businesses....Well, I believe you get the point. If tools are not in place to help this group, we may be repeating a similar cycle.

My advice to small businesses; particularly if you are a new one, is to research the programs thoroughly and find how you can place your business to qualify.

Here are three tips to help you:

1. Know industry-definition. For example, a grant requirement could state, "business must be in the High-Growth & Emerging Industry Sector." Make sure that you understand where your particular business falls.
2. Be grant-ready. You can't expect to get a loan when you have nothing in place. Quite frankly, you should not see a grant as a tool to own a business, rather it should be a tool to help you advance your business. Most of the Stimulus-focused money gives preference to activities that can be started and completed quickly. So make sure your non-profit is 501c3 ready, you have employees or contractors on stand-by, you have a business plan and structure, and you look grant-worthy.
3. Educate yourself. You must be aware of the requirements and be ready to show how you meet those requirements. Research the proposal formatting and be ready to submit your Request for Proposal (RFP) within the allotted time. Make sure you follow all directions and are detailed enough to show why you deserve the award.

I've also listed three websites to help you:

• The Federal Recovery Act Website: Started as way to have transparency of government funds, this website brings you news and updates straight from The Obama Administration.
• Speaker of the House, Nancy Pelosi's website: The speaker's website keeps you updated on the latest unveiling of the funds to various states and its effect on small businesses.
• Ohio Senator Sherrod Brown's website: What I like about this website is the Guide to the American Recovery and Reinvestment Act in Ohio that is included. You will get the most detailed information and guidance with this tool.

About the Author: Cheryl Isaac is the writer of this blog and a Startup Business Consultant & Owner of Isaac Business Services, an agency that offers startup concierge & business planning services for small businesses.