Friday, February 5, 2010

Direct Lending to Businesses

The New York Times reports on a small business owner's question posed recently to President Obama during a town hall meeting in Tampa, Florida. Steve Gordon's proposal was that if the government is to be involved in supporting loans to small businesses, why not lend directly to those small businesses? Obama's response was to explain that the SBA doesn't have the infrastructure in place to process and oversee direct loans; that local banks are better able to handle such loans more efficiently. The frustration of course is that even these local banks are still lending too little, too late.

Interestingly, this comes on the heels of the President's renewed pledge to do away with subsidies to support private lending to students, in favor of an expanded Direct Student Loan program. One difference perhaps is that the Direct Loan program already has in place the infrastructure to handle these loans. Regardless, there are still those who resist such a move toward reducing wasteful and inefficient government subsidies.

Is there any reason that the SBA and the Direct Student Loan programs couldn't team up to handle small business lending as well? With all the talk of increasing partnerships between universities and entrepreneurs, wouldn't such a pairing be an appropriate first step?

It is a valid question and worthwhile discussion to be had: what is the most efficient means for utilizing existing government revenues for the purpose of supporting and sustaining the development and growth of job-creating businesses?

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