NTMA & PMA Issue Statement on Small Business Lending
The National Tooling and Machining Association (NTMA) and the Precision Metalforming Association (PMA) issued the following statement in connection with the hearing and mark-up of legislation in U.S. House of Representatives to promote small business lending:
"Manufacturers currently lack the access to credit needed to help finance their day-to-day operations, invest in expansion of domestic operations and ensure a disruption in the critical supply chain does not occur. Traditional lenders have either drastically reduced lines of credit or denied loans to companies that are healthy or temporarily impaired due to the global economic crisis. Small and medium sized manufacturers continue to bear the brunt of the financial crisis - trapped between their customers and creditors. OneVoice supports legislation and regulatory action to help small and medium sized manufacturers that are based on the following principals:
- Establish Small Business Loan Fund with Unique Regulations. Federal regulators should develop a unique set of consistent and transparent guidelines to govern small business (defined by SBA NAICS criteria) loans placed in a specific pool or program.
- Inject Capital to Banks, Address Capital Ratios: The President's Small Business Loan Fund proposal presents a critical first step in shoring up the financial stability for community banks. However, local lenders still face two critical needs-addressing capital ratio requirements and the injection of critical funds or guarantees to encourage lending to small businesses. Providing backing to these banks must be combined with addressing a balanced Tier 1 capital ratio for banks in order to foster and encourage lending.
- Address Collateral Shortfalls: As the value of real property, capital equipment, and inventory has decreased, many manufacturers face challenges meeting collateral requirements due to temporary appraisal levels. A program to help meet the collateral requirements and capitalization needs is an important component to addressing the credit crisis facing manufacturers, particularly automotive suppliers.
- Accounts Receivable Insurance Program: For the complex manufacturing supply chain, most middle-market companies must purchase materials and equipment at their own cost, waiting months before receiving partial or full payment from a customer. Lenders are restricting lines of credit based on a borrower's accounts receivable (A/R) due from particular customers, especially those in automotive and other volatile sectors. Banks are wary of lending to certain industries for fear the borrower's customer will not pay in a timely manner. A private government guaranteed accounts-receivable insurance program could alleviate concerns of both borrower and lender while improving A/R as a form of collateral.
Congress needs to pass legislation quickly so that thousands of small businesses can obtain the access to capital needed to purchase equipment and rehire employees as the economy recovers."
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