The repercussions of the recession continue to impact the state governments across the U.S. In turn, small businesses are facing additional struggles.
Some programs offered by state governments to assist small businesses are at risk of elimination because of the governments’ enormous debt. The programs, which offer loans to business owners, are a necessity for many entrepreneurs who cannot receive credit from traditional banks because of the institutions’ post-crisis belt-tightening.
Governments Cutting Costs
Many state governments from coast to coast have mounting debt to deal with and fewer tax returns from which to draw revenue. Some of the nation’s most populous states, such as New York, California and Illinois are carrying the heaviest debt burdens, according to Forbes.
Some of the states that sponsored small business loan programs, such as Vermont, Massachusetts and California, have found that the well has all but dried up. The loans issued through these programs are typically co-sponsored by the states and private entities, but without the infusion of state funding, the programs might not be able to continue. One way states could find respite is through federal aid. The states under the heaviest debt burdens are looking to U.S. President Barack Obama for help shouldering their loads, but the president is running into problems passing his administration’s small business bill. The federal small business lending bill is currently stalled in Congress as many Republicans are opposed to putting more taxpayer money into fixing the economy.
Small Businesses Taking the Hit
Small businesses don’t have the same access to credit via standard banks and lenders that they did a few years ago. That might not be a huge issue if the government had the money to keep churning out loans.
Many banks have made loans tougher to take out after they lost money during the financial crisis and were rebuked by the government for their actions. Banks’ lending practices were much more — and perhaps too — relaxed over the past five to ten years, but the time of easy credit seems to have come and gone.
The lack of available credit hurts small business owners and the economy as a whole. It appears that the unemployment rate, hovering just below 10%, will remain high for the time being. Without access to loans, many small businesses either cannot continue to operate or cannot afford to hire additional help. Putting more money into programs that make loans available to small businesses could potentially result in an improved national employment situation.