Increasing the number of small business loans
and the lines of credit they represent has been a potent force in driving job
creation to aid the economy, especially over the past three years. The Small Business Jobs Act included a number
of provisions to increase the availability of capital to entrepreneurs and
small business owners, with the express intention of increasing employment
opportunities during difficult economic times. Economists, small business
owners, and government officials all agree: the plan has been a success.
Some of the most influential provisions of the
act focused on enhancing the current loan provisions to make more money
available to more small businesses, under more varied circumstances. Higher loan limits were instituted for 7(a)
and 504 loans, from 2 million to 5.5 million dollars, with small manufacturers
eligible to receive the maximum amount. Microloan
limits were increased as well, from $35k to $50k, permanently. More small businesses also began to meet the
necessarily qualifications to receive loans thanks to expanded size limits,
allowing businesses with lower net worth and less net income to qualify.
Increasing
capital availability for small manufacturing business owners was a priority for
the proponents of the Small Business Jobs Act. Many of the Acts provisions specifically
targeted small manufacturing businesses, because of the industry’s known impact
on the job market. The vast majority of
American manufacturing companies are small businesses; some estimates put it
the ratio as high as 98%. And those
businesses account for over a third of Americans employed in
manufacturing.
According
to the Labor Department, 400,000 new jobs were created in the manufacturing
industry since the signing of the Small Business Jobs Act. The increased availability of employment
provided the ailing economy with a much-needed boost. The increased loan
limits, especially for small businesses in manufacturing, made more than 10
billion dollars available in small business loans. The availability of that capital created
greater supply chain access for small businesses, which has directly translated
into more job opportunities.
In the past, lack of supply chain access has been a strangle point in the growth of small manufacturing businesses in America. The largest factor in the success of small businesses in the manufacturing industry has been their ability to obtain corporate customers. Having a corporate customer base is also directly linked to small business expansion. Small businesses, on average, double their number of employees within a single year of gaining corporate customers. Within two years, they more than triple in size.
One of the most difficult barriers to entry in the corporate supply chain is cash flow. Small manufacturers need to be able to turn out corporate-sized orders to take on corporate customers. Those who hadn’t yet gained their first large customer were at an impasse, because they didn’t yet have the income for the expansion necessary to be able to meet corporate order demands.
Small
business loans stepped in to fill that gap.
By increasing the availability of capital to small manufacturing
businesses, those businesses were able to expand, hire more employees, and in
turn gain larger customers.
Due to the enormous success of the Small Business Jobs Act, and the economic growth it fostered, further enhancements have been made to government backed small business loans. The CAPlines program, for example, is specifically designed to provide small businesses with short term credit using purchase orders and contracts as collateral. For a small manufacturing business, this means they can take on orders which require expansion and receive a loan to facilitate that expansion. This makes it easier than ever before for small manufacturing businesses to create new jobs and gain larger customers.