Small Businesses Skeptical on Obama's Economic Plan

By Laurie Bernstein - bio | email

COLUMBUS, GA (WTVM) - Allen Bower always dreamed of opening his own business, and after several years of scrimping and saving as an electrician, he finally had enough money to open the computer repair shop Cyberstorm PC.

It was a venture Bower and his business partner did all on their own backs, without any help from the banks.

"We had to pull money out of our own pockets, because the banks were denying everyone loans. Even some 401K money had to be used, which is usually a big no-no," said Bower.

Two years later, even though their business is growing, they are still running into roadblocks when it comes to getting loans.

"I'd like to expand, and cover it with employees, but I can't do that because I don't have money," said Bower.

President Obama is trying to help small business owners like Bower with his plan to jump start lending.

To start off with, Obama wants to eliminate up front fees and processing charges that business owners have to pay when getting a loan.

The plan also increases the government guarantees on certain loans up to 90 percent of its value.

To make sure this is happening, Obama is mandating the 21 largest banks receiving government money to report monthly on how many small business loans they give out.

Even though it sounds great, many in the financial community are skeptical.

"I've got to be honest, I don't think it's going to be helpful," said Kevin Wilkerson, President of Vail Business Associates. "What we don't see is overall vision, strategy or plan. There are no actions that will accomplish that vision."

Wilkerson says small businesses are very risky ventures for banks, with 80% failing within the first five years.

In this economy, there isn't much room for lenders to take chances.

"I think the majority of people on the street forget sometimes that these banks are businesses making business decisions. Bank CEO's are like the rest of us, wondering where the administration wants to go next," said Wilkerson.

"I'm still waiting, it's probably not going to come anytime soon, but when it does, I'm going to be waiting with open arms," said Bower.