[Congressional Record Volume 155, Number 79 (Thursday, May 21, 2009)]
[Senate]
[Pages S5807-S5808]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


                      NATIONAL SMALL BUSINESS WEEK

  Ms. SNOWE. Mr. President, this week we celebrate National Small 
Business Week, a time that affords us the opportunity to reflect not 
only on the countless contributions that small businesses have made, 
and continue to make, to the economic strength of our great country--
but also on how the Federal Government is assisting these companies to 
be successful in their own right. As such, I rise today as ranking 
member of the Senate Committee on Small Business and Entrepreneurship 
to discuss the status of our Nation's 27 million small businesses, and 
to elaborate on the role the Federal Government is playing, can play--
and must play--in providing these critical firms with the resources and 
tools they require to lead us out of our deep economic morass.
  The facts and figures are enlightening. Small businesses represent 
99.7 percent of all employer firms nationwide. They generate two-thirds 
of net new jobs annually. And they create over half of our Nation's 
nonfarm private gross domestic product--GDP. So there can be no 
question that small businesses are critical to our nation's economic 
vitality and success.
  Yet we face an economic landscape that is unlike any other we have 
seen in decades. The unemployment rate stands at 8.9 percent--the 
highest level in over 25 years. More than 13.7 million Americans are 
without jobs, 5.7 million of which have been lost since the beginning 
of this recession in December 2007. We are in an economy that 
contracted 6.1 percent in the first quarter of 2009--after having 
contracted 6.3 percent in the fourth quarter of 2008. During what is 
the deepest and longest recession since the Great Depression, small 
businesses struggle in accessing capital to purchase equipment and 
expand their operations; providing affordable and quality health 
insurance to their employees; and complying with complex tax laws and 
regulations.
  Without healthy small businesses, our economy cannot--and will not--
recover. We must design comprehensive and thoughtful initiatives to aid 
small businesses during these difficult times. President Obama and this 
Congress have already taken several steps, but these cannot represent 
the totality of our efforts.
  The central focus and priority of our efforts must be thawing frozen 
credit markets and increasing lending volume. The flow of credit is 
critical to the well-being of small businesses because when companies 
cannot access credit, jobs are lost and businesses suffer. What last 
year was a ``credit crunch'' for small businesses has all too rapidly 
ballooned into a full-blown crisis. This calamity threatens to continue 
shuttering storefronts all across Main Street America--the very last 
thing we need at this critical juncture. At a time when small 
businesses should be turning to the safety of government-backed 
lending, Small Business Administration--SBA--loan volume is showing 
mixed results.
  Recently, Congress and the White House have taken a number of steps 
to address this crisis. Specifically, in the American Recovery and 
Reinvestment Act, Small Business Committee Chair Landrieu and I worked 
together to eliminate fees and increase guarantee rates to a maximum of 
90 percent for the SBA's flagship 7(a) and 504 loan programs. The Obama 
Administration quickly implemented these vital provisions. As a result, 
average weekly SBA loan volume has increased 25 percent since their 
implementation.
  This is significant progress. Nonetheless, as I continue to hear from 
entrepreneurs, including during four small business roundtables I 
recently held in Maine, credit remains constrained. Accordingly, I am 
calling on the Obama administration to immediately implement the 
remaining small business provisions from the Recovery Act, something 
our committee members urged of SBA Administrator Mills just last week.
  And it appears that the administration is listening. On Monday, 
Administrator Mills announced the official roll-out of the new Business 
Stabilization Loan Program, otherwise known as the America's Recovery 
Capital, or ARC, loan program, to provide interest-free loans, up to a 
maximum of $35,000, to firms having difficulties making loan payments. 
These stabilization loans include deferred repayment schedules, to help 
small businesses weather this recession. A critical provision that 
Chair Landrieu and I worked together to include in the Recovery Act, 
the ARC loan program will act as a bridge for hundreds of small 
business owners that just need a small infusion of capital to stay 
afloat.
  Chair Landrieu and I also worked together to increase funds for 
microlending within the SBA, and ease refinancing restrictions for 504 
loans, allowing more small businesses to access credit and other 
resources through the SBA. These are crucial measures that, if 
implemented soon, could have a dramatic effect on the flow of credit.
  I am pleased that President Obama recognizes the credit crisis and 
held a White House Summit that I participated in last March to address 
the concerns of the small business community. In a step for which I 
advocated in conversations with the administration, he used the 
occasion to announce that Treasury will directly purchase, through the 
Troubled Asset Relief Program, TARP, $15 billion in securitized SBA 
7(a) and 504 loans. A witness before our Committee recently testified 
that this essential step is a ``great launch pad'' for promoting 
liquidity in the secondary markets to spur new financing dollars, and I 
agree. I encourage the administration to roll out this program as 
quickly as possible.
  The provisions in the stimulus and the President's announcement are 
positive steps addressing different facets of the problem we are 
addressing here today, but more must be done.
  During a private meeting I had with President Obama in the Oval 
Office recently, I implored the President to create a competitive 
lending platform at the SBA. Too often, potential SBA borrowers are 
stymied by the limited number of SBA lending options in their 
community. In the traditional lending sphere, this problem has been 
addressed by the emergence of private for-profit Web sites that 
aggregate lending offers for potential borrowers, giving banks the 
opportunity to compete for lending business. A lending platform that 
allows SBA lenders nationwide to ``bid'' on potential borrowers would 
increase potential SBA borrowers' access to SBA lenders and would 
increase the pool of applicants for banks. This platform would create 
more competition and availability for borrowers, and in turn lead to a 
likely reduction in interest rates for SBA-backed loans.
  At a Small Business Committee hearing in March, we heard testimony 
about the difficulty small business owners face in maintaining existing 
lines of credit during these uncertain economic times. Small businesses 
are reporting that banks are ``calling'' back loans, by requiring 
outstanding loans to be repaid within compressed and expedited 
timeframes. Unfortunately, with banks demanding payment and little 
access to other credit, the survival of numerous small businesses is 
being threatened.
  As such, another solution to the credit crisis worth considering is 
using TARP funds to guarantee lines of credit for small businesses. The 
Treasury Department could use funds from TARP to support guarantees on 
credit lines and in return, the bank receiving this guarantee would 
agree to help craft a payment schedule that would help the affected 
small business. This program would be completely voluntary but would 
benefit both the borrower, who would continue to receive credit, and 
the lender who would receive a guarantee on an outstanding loan. Chair 
Landrieu and I sent a letter to Treasury Secretary Geithner in March, 
and he has been extremely helpful in working to assess the viability of 
this proposal.
  Among the many issues we have been discussing here in the Senate is 
the onerous burden of taxes--a topic that arises every time I speak 
with small business owners. Frankly, small businesses suffer under the 
weight of our Nation's tax burden. The undeniable and regrettable fact 
is, tax compliance costs are 67 percent higher for small business than 
for larger firms. A horrendously complicated Tax Code fosters evasion 
that then builds skepticism among Americans about the validity of the 
whole system. Much of our Tax Code is also due to expire in less than 2 
years. And as a senior member of the Senate Finance Committee, I am

[[Page S5808]]

ready to work on a bipartisan basis to forge a new tax code that is 
progrowth with the fewest number of economic distortions and that 
raises sufficient revenue to finance our Nation's spending priorities.
  I must say that I am particularly concerned about raising taxes on 
small business owners when the tax cuts expire at the end of 2010. 
Raising personal tax rates from 33 to 36 percent and from 35 to 39.6 
percent results in a 9 percent tax increase on small business because 
93 percent of small businesses are organized as flow-through entities 
such as partnerships and Subchapter S corporations. Taking another 9 
percent out of small business leaves fewer resources available to small 
business owners to reinvest in America's greatest job generators.
  There are lots of conflicting studies, but Treasury data indicates 
that almost 70 percent of flow-through income is earned by 9 percent of 
small business owners, and these are the owners who are generating 
jobs. Furthermore, according to data Senator Grassley received from the 
Joint Committee on Taxation, small business owners would pay more than 
half the taxes from higher marginal rates. That data indicates that 
$187 billion of the $339 billion raised from increasing the top two tax 
rates would come from small business. Notably, I offered an amendment 
during the budget debate that would have prevented tax increases on 
small business owners if more than 50 percent of their income came from 
a small business. The amendment, which would have allowed this proposal 
to go forward if offset, passed by voice vote but was inexplicably 
dropped in conference. Nonetheless, it is imperative that we work 
together to preserve the tax cuts for all small businesses, and I hope 
that we can.
  I would also like to add that although the Recovery Act made some 
vital changes to the Tax Code to help small businesses--such as 
extending bonus depreciation and expensing--it fell short in its 
treatment of net operating losses. The Recovery Act allows small 
businesses to carryback 5 years losses they incurred in 2008, a 
provision for which I successfully fought. This indispensable cash flow 
tool allows businesses that have been profitable--but are currently 
facing losses--to file for a refund of taxes paid in the last 5 years. 
Yet, this relief remains incomplete as it was limited to businesses 
with gross revenues less than $15 million. So I commend the President 
for proposing to allow all businesses to carryback their 2008 and 2009 
losses for 5 years. That is also why I introduced a bill to address 
this situation, and I thank Senators Baucus, Hatch, Stabenow, Ensign, 
Lincoln, Cantwell, and Bill Nelson, for cosponsoring this significant 
legislation.
  The bottom line is that at the end of the day, if small businesses 
cannot gain greater access to capital, our economic recovery will be 
slowed, stagnated, or worse. I have made several suggestions today 
that, when coupled with the small business provisions passed in the 
Recovery Act, can hasten a revitalization of our Nation's economy. I 
sincerely hope that we take to heart the critical role small businesses 
play in the creation of a healthy and stable economy, and work in a 
bipartisan fashion to seek new ways of ensuring that we in Congress are 
providing them with the right kind of assistance.

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