CARES ActFinancingSmall Business

Main Street Lending Isn’t Happening; What’s Next?

News Update

Two days ago I published a Q&A format summary of the new Main Street Lending Program, a potentially huge program that was authorized by Congress as part of the Cares Act. My writing ended with an optimistic position that the program might eventually be leveraged to finance trillions of dollars of loans across the nation for small business recovery. Then yesterday The Wall Street Journal carried an editorial with a far more negative outlook for the program. The editorial emphasizes “It would be an understatement to say that this lending hasn’t happened“. The editorial tells us specifically what is wrong with the Main Street Lending program, what is needed to fix it, and why government is not applying the necessary fixes. In the near term, under current conditions, the Main Street Lending Program is not a help to us in the small business market.

The Unmet Need

The need for restart funding is a huge issue from the perspective of the small business economy. It’s a different world for small businesses than larger corporations. Some small business clients who suffered looting, thefts, loss of employees and other obstacles during the shutdown don’t stand a chance of reopening with a plan that includes access to capital. These small businesses won’t meet standard bank credit requirements. It they did, the problem would be solved already. Many small businesses in my local South Jersey coastal area are still paying off debt from Superstorm Sandy recovery. Other potential entrepreneurs know that their former employer isn’t likely to reopen so they want to strike out on their own with bolder leaner business plan. We need a fresh new source of financing to rebuild small businesses. The search for small business financing is now at the top of our recovery priorities.  

Possible alternative

I’ve been interested and active in the concept of a local community small business investment fund. The idea is to support all aspects of the business as a community, not just provide the financing and walk away. This concept has worked elsewhere, both within the U.S. and worldwide, and local business leaders and officials like our Small Business Development Center manager have encouraged me to pursue it. I’ve considered the possible tax advantages of this approach. I even went to the extent of setting up the entity and legal framework to support the concept but didn’t have time to launch it before the pandemic. I know that private investors would support it, but only if there is a public or larger institutional investor. Government support is not essential, but it sure would help. There has never been a better time than now for this more creative approach so I’ll put a renewed energy into exploring ways to make it happen.

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