The Troubled Asset Relief Program (TARP) issued its final report that made it evident that the program helped to steady financial markets and prevent the failure of financial system. In contrast, panel Chairman Ted Kaufman noted that “programs for Main Street have been far less effective.” TARP catered to help Wall Street firms rather than solving problems of small business borrowers.
Lessons Drawn from TARP
- White House Congress and other federal agencies have different definitions of small businesses. Thus comparisons of policy proposals and data become difficult. So, it is necessary to define small businesses in a coherent manner. Using definitions that encompass 99.9 percent of all companies, too much variation is created for identifying common credit problems and solutions. Oversight committee report explains that policy makers have contributed little to narrow gaps for defining small businesses or to identify types of businesses.
- Receive up-to-date and accurate data on small business credit market. During financial crisis, policy makers were compelled to take decisions so as to gauge the degree of supply and credit effect. Deterioration of small business balance sheets, loss of capital, or business owner sentiment contribute to the decrease in small business lending.
Small businesses are willing to find out from banks how much they can borrow from banks and how much banks are willing to lend. The federal government has done little to fix information gap and has led report’s author to write “In the absence of a rigorous data collection system or survey that examines small business finance and includes timely and consistent data, the federal government’s efforts to develop sound policies to address small business lending will remain significantly hampered.”
This article was submitted by Rohit Arora, co-founder of Biz2Credit. Biz2Credit is a small business marketplace that connects entrepreneurs with financing options and advice to grow their business. Send all questions to