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Small Businesses Start To Get Their Own Bailouts

By Marc Tracy

When the bailout of the Big Three automakers was being debated last December, we pointed out that the welfares of the Three also impacted the welfares of thousands and even hundreds of thousands more, many of them small businesses. Fortune has a new article that examines this in-depth, taking a look at several small businesses who are involved in the Three's supply chain and find themselves quite imperiled indeed.

One of the types of businesses, many of which are small ones, that are poised to lose the most even in the event that the Big Three make it out of all this alive are dealerships--hell, General Motors's own recovery plan involves cutting thousands of dealerships loose. We were interested, then, to see this post on Independent Street linking to this Journal article on two California towns that have actually taken to offering favorable loans to local, struggling dealerships.

As a blog dedicated to screaming about how small businesses have not received government help proportional to big companies or commensurate with their macroeconomic importance, we are, naturally, thrilled. (!!!)

The reason why the towns are doing this is obvious. As the mayor of Victorville, in San Bernardino County, told the paper, "The last thing we want is for them to shut down, leaving an empty building, an eyesore in the auto park, and more people unemployed." The dealerships are also massive sources of sales-tax revenue, according to the article, as well as prominent sponsors of everything from Little League to rodeo (apparently they do rodeo in SoCal). The town's fortunes are bound up with the dealerships', in other words.

What's the broader lesson to take away from this? An analogy can be made between these towns, who are small enough and low enough to the ground to perceive the needs of small businesses like these struggling dealerships, and the community banks, who are small and attentive enough to recognize the value of small business loan applicants, and extend them credit where big banks (who are analogous here to the federal government) won't.

So from a policy standpoint, what should small business advocates be pining for to encourage further arrangements like these California towns'? We're open to suggestions, but the first thing that pops into our head is: aid for the states.

Any stimulus package eventually passed will have this anyway, of course, because many states are facing dire budget situations; and states are likely to spend the money immediately, which is a key requirement for an effective stimulus measure. In fact, liberal think-tank the Center for American Progress put together a nice chart detailing how much each state is slated to get under the stimulus bill passed by the House of Representatives.

But states are also where lots of towns get some of their operating budgets from. And it appears that small businesses may increasingly depend on the cities and towns to survive these lean times. So we're going to be loud and proud on this one: more stimulus money to the states! It's the best hope small businesses have for the (indirect) bailout they deserve.

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