Local businesses see hope, skepticism in Obama plann
Many suburban small business owners are hopeful and somewhat skeptical about President Barack Obama's efforts to rescue lending within the local economy.
The Obama administration announced Monday that the 21 largest banks receiving government money must report monthly on how much lending they do to small businesses. The announcement was part of a broad package aimed at boosting the credit available to struggling small business owners.
"I'll believe it when I see it," said Eric Wendt, owner of Kane County Dugout that recently opened in St. Charles. He added that the plan sounds good on the surface, but said he has not heard all the details.
Local economic leaders are optimistic with the initial plan designed to loosen credit, the lifeblood of the American economy. "This could be a great thing. It could really help our local retailers," said Peg Blanchard, director of economic and community development at village of Barrington.
Dale Perrin, executive director of the Lake Zurich Area Chamber of Commerce, believes small business could really benefit from the plan, adding that he's anxious to learn more about it.
The White House figures that making billions in federal loans available to small businesses was one way to address misgivings over the widely unpopular bailout program, which has sent hundreds of billions to large financial institutions like Bank of America Corp., Citigroup Inc. and JPMorgan Chase &Co. with few strings attached.
Wendt from St. Charles hopes that the new plan will ensure that the money going to the banks is earmarked to go to the right place, such as loans for small business.
Other small business owners wonder if all banks will get a piece of the pie. David Hertog, owner of Hertog & Assoc. private detective agency in Barrington, said he uses a small community bank and wonders if it will be affected as well. "I have to say I'm sceptical of the announcement," said Hertog, a Fremd High School graduate who has owned his firm for 11 years.
Monday's announcement includes $730 million from the stimulus plan to immediately reduce small business lending fees and to increase the government guarantee on some Small Business Administration loans to 90 percent. The government also is taking aggressive steps to boost bank liquidity with up to $15 billion aimed at unfreezing the secondary credit market.
Under the administration's initiative, the government will step in to buy SBA loans in the secondary market to help unlock the frozen credit market, using money from the recently passed bailout package in the range of $10 billion to $20 billion, one official briefed on the plan said.
Ron Brazener, owner of an Aurora small business questions if this plan is going to lead to greater problems of the banks lending too easily, as they did in the case of homeowners several years ago. "I'm not sure this is a good idea. If the business owner gets the loan and the business fails, then the tax payer is left holding the bag," said Brazener, owner of Play N Trade video game store.
"It's a tough call. I'm all for trying to simulate the economy," said Brazener, 63. "But we don't need to loan more money to see more defaults," he said.
• Daily Herald news services contributed to this report.