Congress and the SBA should assist SMEs in traded sectors in obtaining access to credit, in part by creating a 95 percent loan guarantee program.
Particularly in the wake of the recession, small manufacturers are having a difficult time accessing credit from financial institutions, and several policies could help remedy this. First, to help small manufacturers that have work orders in hand get credit, Congress should enact a 95 percent loan guarantee program for small manufacturers under the SBA 7(a) guarantee program. Second, the Federal Reserve should consider relaxing some of the stringent guidelines it has placed on local banks with regard to the liquidity ratios SME manufacturers must meet to be eligible for commercial loans. This would allow local banks to better understand and service SMEs’ capital requirements, given their particular cash flow constraints.