There is a critical need to free up capital for entrepreneurs in America now. Today the House announced that it passed legislation that will open up to $300 billion in loans for small businesses, and $3.5 billion in tax incentives and tax relief. Not a second too soon. Hopefully, soon enough. I sit on the board of a couple venture-backed start ups. These are great companies that have been in business for years, employing hundreds of people, bringing value to their customers and in all cases, the future looks rosy--the markets for their products are starting to take off, their business models are sound. The timing, however, sucks.
Entrepreneurial companies all across the country are strapped for cash. Their venture capitalists, who normally had deep pockets and were in it for the long haul, are sitting on their hands. In nearly all cases, this recession wreaked havoc with their portfolio companies and they are busy shutting down one company after another. The banks are charging usurious rates. Customers are slow to pay, so cash flow is tight. The need to stretch receivables means that these small companies are in turn stretching their payables to their suppliers. It is an ugly situation and it is playing out all over America.
I applaud congress for taking action, for passing these bills which will lead to the creation or salvation of millions of jobs. Small businesses are credited with two-thirds of all new job creation. The traditional base of our country's prosperity has been tied to entrepreneurship--hanging out a shingle and creating a business out of nothing. That enterprising nature is what has in turn given us our lead in global innovation and our position as a nation of opportunity.
Though the passing of these bills today is indeed a godsend, it needs to be coupled with a climate for supportive lending practices to cover cash flow of receivables, to fund new lines of business with new lines of credit, and to enable inventory. A robust venture capital business is critical to a robust American economy. We need to make sure that the venture capitalists can continue to fund new ideas and are incentivized to take the risk that banks can't. These bills go part of the way, by reducing capital gains taxes for investors in C corporations, and in creating a fund for community banks to invest in small businesses. But the fine print doesn't add up to significant change today. Without significant change this year, we will see literally thousands and thousands of companies that deserve to be in businesses that combine to employ millions of Americans disappear overnight.