Schumer Calls For Immediate Expansion of Government Small Business Loans and Lines of Credit to Help Rochester, Finger-Lakes Area Businesses that Are Struggling During Credit Crisis

Press Release

SCHUMER CALLS FOR IMMEDIATE EXPANSION OF GOVERNMENT SMALL BUSINESS LOANS AND LINES OF CREDIT TO HELP ROCHESTER, FINGER-LAKES AREA BUSINESSES THAT ARE STRUGGLING DURING CREDIT CRISIS

With $700B Rescue Money Not Hitting the System for At Least A Month, Rochester- Area Small Businesses Need Credit Now to Meet Their Payroll and Cover Expenses or Risk Going Out of Business

Banks Already Tightening Lending Standards and Credit Requirements and Won't Ease Up Until Federal Rescue Plan Money Comes Through

Schumer to Ask Administration to Create Temp

U.S. Senator Charles E. Schumer today called on the Bush Administration to find ways to provide temporary small business direct government loans and lines of credit, two days after the historic $700 federal rescue plan was signed into law. The plan's funds will not be available for at least one month. During this time, small businesses in Rochester and around the country need credit in order to make payroll payments and for other miscellaneous expenses or they could risk going out of business. During these challenging economic times, these lines of credit will provide further relief for small businesses that continue to struggle. Communities rely heavily on small businesses and without them the country could face further economic strife. Upstate New Yorkers are craving economic stability and this small business rescue plan will ensure that small.

"This plan will throw Rochester businesses the lifeline they need as the credit market drowns," Schumer said. "The $700 billion from the bailout will not hit the system for another month so the already tight credit markets will only get tighter and that could choke small businesses struggling to pay the bills. We cannot forget what this rescue plan is all about and as this process goes forward, we need to make sure we keep our eye on Main Street."

Schumer said that the economic storm that is gripping the nation could be hardest felt by businesses, big and small, in Rochester and across the country. Facing an uncertain future, banks are tightening lending standards for small businesses and at times, even cutting off lines of credit entirely.

The nearly 20,000 small businesses in the Rochester area employ 200,000 employees and produce annual payrolls of over $6 billion. These small businesses generally rely heavily on loans from banks to build inventory, meet their payroll consistently and fuel the growth of the business. Suddenly, those loans are harder to find and they're likely to be more expensive. Making it even worse, credit-card companies are cutting limits and hiking interest rates. They are also shortening grace periods, which can put added pressure on a business owner counting on a few extra days to pay.

The Federal Reserve has reported that 65 percent of domestic banks said they had tightened their lending standards for small-business loans over the previous three months. At the same time, 70 percent told the Fed that they were charging more for those loans. According to the New York Times, in an August opinion poll, two-thirds of entrepreneurs told the National Small Businesses Association that their companies had been hurt by the credit crunch.

Schumer said the $700 billion federal rescue plan, approved by Congress and signed into law by the President on Friday, is designed to relieve pressure on those banks and inject money in to the system to free up the now blocked lines of credit. However, the $700 billion won't make it in to the system for at least another month so banks are likely to hold back on lines of credit until at least the federal money starts flowing.

In order to bridge the gap and ensure that small businesses in Rochester and across the country can continue to receive lines of credit to pay the bills and stay open, Schumer today asked the Bush Administration to find ways to extend lines of credit directly from the government to businesses. Schumer called on the Administration to look in to creating a temporary small business direct loan program modeled after the federal direct loans to students. Schumer suggested that the emergency program be run out of the Small Business Administration which already has lending and grant facilities and programs up and running. Senator Schumer plans to offer legislation in November to authorize the expansion of Small Business Administration lending programs to the extent that the administration's needs additional authority.

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