SBA Launches New
businesses suffering financial hardship as a
result of the slow economy may be eligible to
receive temporary relief to keep their doors open
and get their cash flow back on track through to
a new loan program announced today by SBA
Administrator Karen G. Mills.
Beginning on June 15, SBA will
start guaranteeing Americas Recovery
Capital (ARC) loans. ARC loans are
deferred-payment loans of up to $35,000 available
to established, viable, for-profit small
businesses that need short-term help to make
their principal and interest payments on existing
qualifying debt. ARC loans are interest-free to
the borrower, 100 percent guaranteed by the SBA,
and have no SBA fees associated with them.
"These ARC loans can
provide the critical capital and support many
small businesses need to make it through these
tough economic times," said Administrator
Mills. "Together with other provisions of
the Recovery Act, ARC loans will free up capital
and put more money in the hands of small business
owners when they need it the most. This will help
viable small businesses continue to grow and
thrive and create new jobs in communities across
As part of the Recovery Act,
the ARC program was created as a no-interest,
deferred payment loan to help small businesses
that have a history of good performance, but as a
result of the tough economy, are struggling to
make debt payments.
ARC loans will be disbursed
within a period of up to six months and will
provide funds to be used for payments of
principal and interest for existing, qualifying
small business debt including mortgages, term and
revolving lines of credit, capital leases, credit
card obligations and notes payable to vendors,
suppliers and utilities. Repayment will not begin
until 12 months after the final disbursement.
Borrowers dont have to pay interest on ARC
loans. After the 12-month deferral period,
borrowers will pay back the loan principal over a
period of five years.
ARC loans will be made by
commercial lenders, not SBA directly. For more
information on ARC loans, visit www.sba.gov
You can receive all of the
SBAs News Releases via email. To subscribe,
visit http://web.sba.gov/list and select
Stimulus Stimulating Jobs?
We May Never
Know for Sure
by Olga Pierce, www.ProPublica.org
The Obama administration has
unveiled its plan for measuring how well the
stimulus package works, and the bottom line is:
Many questions will remain unanswered.
While pitching the stimulus
package, the administration batted around the
number 3.5 million when talking up how many jobs
would be created or saved, based on an estimate
by Christina Romer, an economist who now heads
the Council of Economic Advisers, and a colleague
in what was then the office of Vice
President-elect Joe Biden.
The administrations jobs
estimate relied on some broad rules of thumb
(otherwise known as multipliers), assuming, for
example, that every one percent of GDP the
government spends will result in a 1.6 percent
increase in GDP and that every one percent
increase in GDP equals about 1 million jobs saved
But that was just an estimate
to pitch the plan, and soon hard numbers will
start flooding in from agencies and contractors
telling us exactly how many workers the $787
billion stimulus package has saved, right?
A report recently released by
the Council of Economic Advisers, a three-member
team tasked with advising the president on
economic affairs, suggests that real-world data
will not supply a firm standard of accountability
for stimulus spending any time soon. The report
is the first in a series of quarterly reports
tracking the effects of the stimulus.
In the short run, the council
instructs agencies to use the rule that $92,000
equals one job-year (one job for one year) to
determine how much employment their programs are
generating. The $92,000 number is derived using
the administrations earlier macroeconomic
assumptions and, the report says, is intended to
make agency estimates mirror the
administrations. This will make the
agencies numbers a poor check on the
administrations job figures.
Later, data will begin to come
in from recipients of stimulus funding, which are
required to carefully report how many jobs are
created or saved. This is more complicated than
it seems. Surely you count the employees of the
construction contractor hired to renovate the
government building, for example, but do you
count the subcontractors hired by the contractor?
And what about workers at the paint factory who
would have been laid off without business from
the construction project? What about workers at
the nearby grocery store who keep their jobs
because of increased business from hungry
construction workers and paint manufacturers?
The report offers a sneak peek
at the final guidelines the Office of Management
and Budget is expected to release soon for
addressing these very questions.
In the renovation example
above, the construction contractors
employees and the subcontracted workers would
count as jobs created or saved, but the other
jobs wouldnt, according to the guidelines.
The contractor would then
submit a report with the number of jobs created
and saved, expressed in full-time equivalents
(the total hours of work created divided by the
number of hours worked by a full-time worker),
along with a brief description of the types of
work involved, which will later be used to
evaluate the quality of jobs created by stimulus
Lest employers be tempted to
cheat, the OMB will check the data for
"completeness and plausibility" by
looking for outliers among similar projects and
cross-checking information about expenses and
wages with labor market data from the region.
Why cant we just add up
the numbers from these reports to find an
aggregate number of jobs created by stimulus
spending? There are several problems with this,
according to the report.
The first is that those reports
will only document job creation from the $271
billion in direct government spending the
rest of the stimulus was spent on tax cuts, state
fiscal relief and transfer payments like Social
Security and food stamps. No direct reports will
ever come in on the number of jobs created by
The second is that the reports
will only measure direct job creation (think of
the construction example above) and not indirect
effects, even though the administration is
counting on indirect job creation to reach its
3.5 million job mark at the end of 2010.
Finally, the council apparently
doesnt trust those reports very much.
"There will likely be
inconsistencies and measurement error across the
individual reports," the council writes.
"This limitation is present whenever
thousands of recipients with very different types
of projects are asked to provide
But the Obama administration
does have a rough estimate of how many jobs will
be created by direct government spending. (For
the record, $100 billion creates 1,085,355
job-years.) So what happens if its estimate
differs from the direct job-creation reports?
The answer, given by a senior
administration official, is enough to make any
social scientist squeamish: "It will be a
two-way test of how good the numbers we get back
will be and also a test of multipliers."
In other words, if the
job-creation numbers the administration gets from
real-world data disagree with its estimates, they
reserve the right to blame the data. From an
accountability perspective, this will make it
difficult to assess the stimulus successes
But Romer and her associates
propose some avenues for evaluating their own
estimates, like regular checks to see if money
has gone out on schedule, microeconomic analyses
to estimate the number of indirect jobs that
result from government spending, and comparisons
of the unemployment rate with baseline forecasts
of the unemployment rate without stimulus.