I am a small business owner in Bend, Oregon. I advocate the need for a HARP Program for Small Business, similar to the homeowners plan announced yesterday by President Obama.
Many American small businesses are unable to access the credit markets. This is because loan-to-value (LTV) ratios based on current marked-to-market calculations are too high for banks to adjust loans to prevailing interest rates.
My business is currently locked into a 6.15% loan originated before the Great Recession. Because of the Recession, we have had to lower our prices by approximately 25%. Currently all of our revenue after expenses is going to the bank. We have made every monthly loan payment for the last six years. But our lower prices effect the business’s LTV ratio and so we are unable to refinance at current market interest rates. It feels as if we are locked into a kind of financial feudalism by the banks. We need some relief.
When the larger financial system is unable to provide the stability needed for the entrepreneur or home-owner to make bets on the future, there have to be means for debt obligations to be reset. That’s only fair. That’s how we helped the largest banks and corporations in 2008-09. Otherwise we risk the end to America’s history of entrepreneurial activity and will become a nation where only the largest economic interests survive.
A program similar to HARP for Small Business is needed.