Week-4-5-research-and-journal
H.R. 679
Rep. Obey, David R. January 26, 2009: American Recovery and Reinvestment Act of 2009 - Establishes use-it-or-lose-it requirements for grantees using funds in specified accounts who have not entered into contracts or other binding commitments and used 50% of the funds awarded. Provides for redistribution of such uncommitted funds by the appropriate federal agency.
a) One thing I liked about this Bill is that it could provide much needed
financial stability to small businesses by the Small Business Administration(SBA)
- During these troubled economic times it seems that banks, other financial
Institutions and government agencies are having difficulties getting financial
assistance to small businesses. Of note, as the recession has deepened,
banks have had to reclassify good businesses at higher risk levels simply
because of declining sales even though they are often still performing
on their loans. As a result, the banks are required to increase their set
asides into their loan loss reserves. These set asides come directly
from deposits which dramatically decreases the banks ability to make
new loans. Therefore, banks have decreased the amount of existing
lines of credit and are unable to refinance many permanent loans
on commercial loan properties. This has proven to be a traumatic
hardship to the small business community.
b) One thing I don’t liked about this Bill is that it prohibits the use of fund for
a project for the construction, alteration, maintenance, or repair of a public
building or public work unless all of the iron and steel used in the project is
domestic, except in certain circumstances. Like this, in the harsh light of reality, there is restriction to small businesses. For example, according to 2009 Recovery Act, the Small Business Administration(SBA) has a new loan program, so called, ARC loans. It has designed to viable, for-profit small businesses in the U.S. that have qualifying small business loans and are experiencing immediate financial hardship. However, to qualify, the small business must be an established business, have financial statements demonstrating it was profitable in one of the past two years, and be able to project sufficient cash flow to meet current and future loan payments over a two-year period from loan approval. Consequently, most of small businesses which have actually difficult time in this terrible recession are not applied due to the restrictions. Then, I doubt what the government is doing for the policy.
C) One thing that I don’t understand is how to provide increased SBA loan leverage and investment limit. In other words, how much companies can borrow through the SBA. In fact, small businesses can obviously lead us out of recessions. However, they can't do that, what if they can't get access to capital. On the other hand, financial institutions must do everything possible to maximize recovery for all involved parties on each defaulted loan. In this circumstance, both financial institutions as lender and small businesses as borrower are placed on a sticky situation. Therefore, the key point of the Recovery Program is how to reconcile between actuality and
efficiency to assist viable small businesses, banks and the SBA by providing creative options to small businesses heading towards delinquency. with further ability to work with the borrower for a payment plan to assist them through the current difficult economic conditions, thereby saving businesses and retaining jobs.