Over the past few weeks, President Obama has unveiled multiple plans for aid to small businesses, including lowering loan fees, increasing guarantees on government-backed loans, and buying up to $15 billion in Small Business Administration-backed loans. But will the new programs unfreeze credit as they are intended to do? And how can entrepreneurs take advantage of the warmer climate if they do?
Sanford Ehrlich, executive director of San Diego State University's Entrepreneurial Management Center, says the lending initiatives are likely to provide some relief, but he worries it won't be enough to help companies that are really struggling.
"Anything that will increase lending will be good for small business, but you have to be a fairly liquid small business to take advantage of this program. If you have too much inventory, too little cash flow, you're currently carrying debt that's been called, or balloon payments are staring you in the face, adding more debt to your current situation isn't going to help," Ehrlich says. "So many small businesses are in serious trouble that the number this will help will be limited."
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