In Southern California, where a once-thriving small-business economy has been hard-hit by the economic meltdown, hope and skepticism greeted President Obama's proposals last week to help small firms by jump-starting lending and rewarding firms that add jobs.
"They realize small-business growth is the only way we are going to survive this," said Ruben Guerra, head of the Latin Business Assn. in Los Angeles. But so far, he says, "small business is not getting part of the action; big business is getting all the dollars."
Lenders and business owners expressed hope that more federal money will would work its way to the thousands of small firms that dot the Southland and into the economy. But they see roadblocks and frustrations as well.
Obama's plan to reverse the alarming loss of small-business jobs nationwide includes $30 billion for community banks that promise to make more small-business loans. He also wants to give businesses a $5,000 tax credit for each new worker and another credit for giving raises. And he has asked Congress to extend a tax credit that lets a small firm immediately write off 50% of the cost of new equipment against their tax bills.
The goal is to give cautious small-business owners an incentive and the resources to expand, while helping get the economic recovery moving.
Gene Hale, chairman of the Greater Los Angeles African American Chamber of Commerce, said job growth won't take off unless large contractors hired for stimulus projects such as the high-speed rail system are required to hire small subcontractors.
"There will not be an opportunity for people to hire in their own communities," he said.
And those subcontractors will need better access to working capital and inventory loans to take advantage of stimulus projects and the hiring tax credit, he said.
"Unless money flows down to the small-business community and the banks loosen their lending policies, then we will still be basically where we started," said Hale, who is also head of G&C Equipment Corp. in Gardena.
Small-business owner Jack Bernstein, who employs 13 people at Translation Station in Redondo Beach, said President Obama's incentives wouldn't push him to hire people for his translation business whom he can't afford or to apply for loans he doesn't need.
He too is skeptical that the lending and hiring proposals will significantly add jobs.
"I'm running a business," Bernstein said. "If I catch a break on taxes, fine, but I either need employees or I don't."
Bernstein, who started his business in 1991, said he was eager to hire at least one more person but would wait to see how a product launch in April turns out. If sales are promising, he'll hire a new employee -- tax credit or no.
His sentiments were echoed by several other local small-business owners.
Madelyn Alfano, who owns Maria's Italian Kitchen, a small restaurant chain with about 450 workers, appreciates any tax incentive that comes her way but wouldn't add jobs or give raises just to qualify. That also goes for buying equipment, she said: If she doesn't need it, she won't buy it -- whether or not the government provides an incentive.
Alfano said she spent $10,000 at each of her 10 locations last year to upgrade software to comply with new rules on credit privacy information. She could afford the cost, but said most small restaurants would need a bank loan to pay for the computer program.
"You need to have the banks to be willing to lend the money to small business to buy the equipment so that the tax benefit makes sense," she said.
For their part, many community bankers say they are having a harder time finding small businesses to lend to because cautious owners don't want debt or don't qualify.
The promise of $30 billion in Troubled Asset Relief Program funds to boost lending doesn't change that fact, they said.
"The vast majority of community banks do not need that assistance, and those of us that are healthy are still lending," said Steve Gardner, president and chief executive of Pacific Premier Bank, a Costa Mesa community bank with $850 million in assets.
TARP money, bankers said, is unlikely to make them more willing to lend to the growing number of struggling small businesses that want a bank loan but can't qualify.
Despite bankers' assertions that loans are available, calendar publisher Scott Yoon Suk Whang said he couldn't get one to fund his Irvine start-up, Orange Circle Studio, despite a history of good payments on other loans. Whang said he was turned down because he refused to personally guarantee the loan. If he had obtained financing, Whang said, he would have been able to hire more.
"If the government is trying to create more jobs and new jobs, it should encourage more business entrepreneurs to start a small business like this," said Whang, who has owned other small businesses, including another calendar company.
Lenders have to be willing to change their criteria to allow more small businesses to get loans, said Guerra of the Latin Business Assn. And they probably won't unless the government tells banking regulators to allow more lenient rules. That's unlikely given the state of many banks' loan portfolios
With credit remaining tight and small businesses still worried about the strength of the recovery, many will continue to hold back on spending.
"People are still so fearful," Alfano said.