In a recent announcement, President Obama reduces the time that federal agencies can take to pay small businesses for their products and services from 30 days to 15 days. This “QuickPay” announcement receives the support of SBA administrator Karen Mills; however, a reduction in payment time will not necessarily create more jobs or flow down to subcontractors. In the short-run, Obama’s “QuickPay” announcement will increase interest cost savings for a small percentage of larger government contractors who finance their receivables. Although Obama’s announcement will increase the velocity of cash flow, it will not help to improve the job market for unemployed Americans.
Obama’s initiation of QuickPay will create some new jobs, but history indicates that meaningful job creation comes from meaningful capital infusion into start-up businesses or expanding businesses. Therefore, general policies, like QuickPay, that do not explicitly focus on job creation will not create benefits for a substantial amount of people. In order to create jobs for a greater amount of people,
BoeFly suggests that the administration reinstate a variation of SBA’s wildly successful 90 percent guarantee used during the previous stimulus program. To promote job creation, the SBA should offer the 90 percent guarantee to businesses that can demonstrate job creation.
The SBA can promote the job creation requirement by providing for rate increases or guaranteeing fee surcharges for failure to comply. BoeFly’s small business loan experts recommend that the 90 percent guarantee for job creation remain in place until the unemployment rate reaches or drops below 8 percent during a six-month period.
Although the President and Congress often disagree, they both recognize the need to create more jobs for Americans. BoeFly’s proposal focuses on the jobs that start-up businesses create when financing is secured. BoeFly’s proposal incentivizes start-up businesses that create jobs, which creates higher revenues for franchisors and a lower unemployment rate. Without increasing small business deficits, BoeFly’s proposal will create more jobs for more Americans.