Argue all you want about the true effectiveness of the $787 billion American Reinvestment and Recovery Act; however there is one program that has helped small business get back on its feet.

Unfortunately, just as small business is starting to see the light at the end of this very dark economic tunnel the available funding of $375 million for SBA stimulus loans was exhausted as of Nov. 23.

There are two critical items that have made the SBA stimulus loan a very effective tool for borrowers:

1.) The upfront fees (which can total approximately 3 percent of the loan) were waived

2.) The government guarantee for lenders was upped from 75 percent to 90 percent of the loan. This additional security for lenders led to the ability to get deals done in what has become an extremely conservative conventional lending market.

As of Dec. 8 there were 679 requests for the SBA stimulus loans totaling $313.4 million dollars that have been put on hold until Congress decides whether or not to act on this issue.

U.S. Sens. Olympia Snowe, R-Maine, and Mary Landrieu, D-La., have just introduced a bipartisan bill that would call for the extension of the SBA package until Dec. 31 of 2010 and also increase the maximum loan size of the SBA 7(a) from $2 million to $5 million and the SBA 504 loan from $1.5 million to $5.5 million.

With health care commanding the full attention of the Senate right now it is unlikely that this issue will receive much attention in the immediate future and this piece of legislation will most likely be included in some type of jobs bill (Stimulus Part II) being considered for 2010.

Meanwhile many small businesses that finally have the confidence to move forward with expansion have one of the proven successful "stimulants" removed from the economic recovery. According to the SBA, the average weekly loan volume prior to the expiration was up 60 percent from the weeks preceding the passage of the Stimulus package.

I have seen first hand the effectiveness of this program via a start up business by the name of Innovation Station.

Innovation Station was in the middle of purchasing a facility for their new daycare business in Brookfield and then September 2008 hit the financial world and Innovation Station was no longer qualified for a loan. Innovation Station went to five separate banks over the course of five months to try to salvage their dream and finally found a lender that got them approved via the SBA stimulus program. After being open for only four months Innovation Station is exceeding their financial projections and they are up to three employees. While it does appear that we are emerging from the Great Recession the private sector, especially small business, needs to start growing again to sustain a healthy economic recovery.

With the increased lending standards that entrepreneurs face and the difficulty in obtaining capital, the extension and expansion of the SBA stimulus funds are an appropriate measure for growth that Congress should act upon immediately.

If our elected representatives truly want "JOBS! JOBS! JOBS!" this program should be brought back "NOW! NOW! NOW!". Please consider contacting Senators Kohl and Feingold and let them know to keep money flowing to small business.

-- Hoffman is president of the Independent Business Association of Wisconsin and vice president at Judson & Associates, s.c.

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The proposed state budget has a public policy issue inserted that will require any private development that uses any form of public financing in excess of $2,000.00 to pay a prevailing wage to all laborers involved with the project.

While this is a laudable goal, the Wisconsin Realtors Association believes that this mandate could increase the cost of development for some projects by anywhere between 10 percent and 40 percent. The current form of the mandate has far-reaching implications for the life of a development.

There are two possible scenarios that come to mind that extend well beyond the initial development where the mandate could be detrimental to job creation and new development.

1. After Mr. Developer has developed a new 100-acre business park that required public financing and Mr. Developer has paid the prevailing wage mandate for the development of the land, the prevailing wage mandate is attached to any new development that occurs within this project for the life of the project.
   
   As an example, two years from the completion of the new business park, ABC Manufacturing would like to build a new manufacturing facility on a 5-acre parcel of land within the development. Although ABC Manufacturing had nothing to do with the original development ABC will have to pay a prevailing wage to any contractor they select to construct their new facility within this business park.
2. Another example would include Mr. Real Estate Investor constructing a multi-tenant office building in this business park. Mr. Investor will pay a prevailing wage at the time of construction, as well as during the life of the property as tenants move on and the space needs to be re-tenanted. Mr. Investor will have to pay the prevailing wage every time that he has to complete renovations to a space within the property.

There are certainly trades within a development, especially on larger scale and complex developments that warrant paying a higher cost to the contractors to ensure the necessary expertise and quality of the task. There are also areas of construction, such as small-scale tenant improvements, where small businesses compete more on flexibility, speed, and price. The need for a highly skilled laborer and the additional costs that they bring are not necessary for these types of projects. The prevailing wage mandate will drive up the cost of development for developers, investors, and for businesses.

The end result will be that the development does not happen or the cost will be passed on in one or all of the following ways: to the taxpayers in the form of a larger request for public funding, to the tenant in the form of higher rent, or to the business in the form of a higher cost for the facility.

A strong argument can also be made that small businesses associated with the field of construction will be disproportionately affected by this mandate because their distinct competitive advantages include competing on pricing, flexibility, and speed. All things being equal on pricing, if a developer is faced with paying a prevailing wage to a large union shop who has the reputation of better training and skill level and a choice of paying a prevailing wage to a small business owner who does a quality job but doesn't necessarily have the access to the skilled and trained labor pool, the easy selection would be to employ the large union shop. The small business will also be hampered by the increased burdens of record keeping and confusing classification issues both of which are issues that a human resource department could easily handle, however such departments are rarely in place at small contracting companies.

The use of public financing in the form of TIF districts, new market tax credits, and other public incentives are extremely important tools to spur economic development. Two projects that were recently in the news and related to Wisconsin included the announcement by the state of Michigan offering nearly $150 million in tax credits and incentives to Johnson Controls for a state of the art lithium-ion battery plant and the state of Louisiana offering $9 million in public incentives to lure Thomas Industries away from Sheboygan.

In a globally competitive market place the state of Wisconsin should be looking at ways to enhance the effectiveness and use of appropriate public financing options to spur economic development as opposed to creating obstacles to the implementation of a successful tool that encourages job creation.

Prevailing wage is certainly warranted for many aspects of larger scales developments, however mandating prevailing wage for all aspects of a development with $2,000 or more in public funding will drive up the costs for developers, businesses, and taxpayers, potentially prevent projects from happening, and also impact the ability for small businesses in construction to land contracts because their competitive advantage on pricing will be taken off of the table.

-- Hoffman is president of IBA-W, a member of the Commercial Association of Realtors Government Affairs Committee, and vice president at Judson & Associates, s.c.

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