Need A Job? See Me.

There's been a lot of lip service paid to small businesses recently. Today, President Obama is holding a summit on job creation, with a special focus on the role of small and medium-sized businesses. Last month, investment bank Goldman Sachs committed $500 million over five years to aid us little guys. Unfortunately, the big bank didn't plan to lend any of the money directly to Main Street*, instead committing to provide such things as community-college scholarships and networking opportunities. Just two days after Goldman's announcement, Treasury Secretary Timothy Geithner convened a forum to figure out how to get the big bailed-out banks to return some of the love to small businesses. "We need banks to be working with us," he declared, while defending their recent, large profits, "not against recovery."

Why the sudden handwringing over small businesses? Well, it turns out that we're as important, if not more so, as big companies when it comes to job creation. So there won't be any sustained recovery until small companies start hiring job applicants again. During the go-go days from 2003 to 2007, companies with fewer than 50 employees generated 33 percent of job growth, according to the Bureau of Labor Statistics. Now—surprise—these companies have shed jobs like mad, accounting for nearly 45 percent of the jobs lost during the recession. It's little wonder that 17.5 percent of Americans were unemployed or underemployed in October, according to the Labor Department, the highest rate since 1982.

But the small-business jobs spigot isn't going to turn on again overnight. It isn't for lack of education or brainpower, as a less generous interpretation of the Lords of Finance $500 million pledge might imply. Instead, small companies, like our family-owned packaging manufacturer, aren't hiring for a whole host of smart reasons. Most obviously, many of us simply don't trust that the economy has turned the corner. "I'm worried about a double-dip recession," says Chris Mittelstaedt, owner of The Fruit Guys, a San Francisco-based company that delivers fresh fruit and vegetables to schools and offices nationwide. "It's not like consumers are spending again."

Our bailed-out bankers aren't helping matters. Instead, Treasury's latest report on bank lending to small businesses shows a continuing contraction; it's down $10 billion since April, to $259 billion. Banks have added to small businesses' burdens by hiking fees on everything from deposits to checking accounts. Then, as if to drive the point home, they're boosting interest rates on credit cards, another source of small-business finance, to unheard-of levels. State governments have simply doubled the pain with higher taxes and fees meant to shore up public coffers. The state of New Jersey, for instance, has added roughly $1 of tax to every bottle of liquor purchased by restaurant owners. "If they stopped raising my taxes," says Barry O'Donovan, owner of Kilkenny House Restaurant and Pub in Cranford, N.J., "I might hire some managers. I'd love to have more time with my family."

So the deck certainly seems stacked against us. But there are some policies that could get small businesses to at least start handing out applications again. First and foremost, Mittelstaedt believes, it would help if big businesses began spending again. "There really is a trickle-down effect," he says. The revenue of his company, which has sales of more than $5 million, is, like that of many small businesses, driven by the willingness of his bigger brethren to buy services. But too many firms, such as Oracle or Caterpillar or even Goldman, are sitting on piles of cash, themselves waiting to see whether the economy really continues to recover. Perhaps there's some way to tax idle cash sitting on balance sheets, or give tax breaks for spending it.

Governments give such tax breaks all the time. These days, the federal government is providing businesses and homeowners with tax breaks for investing in solar-power systems, for instance. Once upon a time, the federal government gave an investment tax credit to companies that spent money on capital goods, like new equipment. Instead, Paul Appleblom, chief executive of Jatco, Inc., will get no tax break, because the Feds let it die years ago. His company, a small Union City, Calif., manufacturer of plastic molds and parts, recently bought two new large stamping machines that will create up to 20 jobs. But worse than the lack of federal tax assistance is that California, one of 12 states that charge sales tax on new machinery, will tack on nearly $50,000 to his purchase price. "Government hasn't figured out that business is the engine that pulls the train," he says. With its dire financial situation, California may not want to give up the cash. But federal and state governments could also reward companies like Jatco by giving them a tax break for each new employee hired.

Leave it to San Francisco to take this idea one step further. It actually has a program called JobsNow that pays companies to hire people. The program uses federal economic-stimulus money obtained by the city to pay private businesses to hire the local unemployed by directly subsidizing 100 percent of the new employee's wage. The city simply requires that the job pay at least the local minimum wage of $9.79 an hour. Mayor Gavin Newsom hopes the $26 million program will create 2,000 jobs, which wouldn't be a bad return (only $13,000 per job). One local laundry says it hired four new employees, all fully underwritten by the program. So far, Newsom says the program has created more than 800 new jobs.

Obviously, stimulating lending would give the biggest boost to small businesses. Without dollars, even if there is demand, there won't be the money to capitalize. Certainly Congress could stipulate that banks that received taxpayer bailouts begin loaning money to small businesses. The federal government could even help matters by increasing the loan size the Small Business Administration will guarantee. Geithner has proposed just that, suggesting that the cap lift to $5 million from $2 million. Heading down the same road, the National Small Business Association has suggested making funds from the Troubled Asset Relief Program that are being used to prop up banks available at low interest to small businesses in need of cash.

If Goldman and other big banks, why not the small businesses that will drive job growth? That may seem like going too far, but the possibilities to jump-start small-business hiring seem endless, and in that sense there should be less hand-wringing and more action. As for my company, we're waiting. Our business isn't booming, but it's still growing, and we could use a few additional managers, like a controller, to help us. I'd also love to hire a new salesperson to expand our reach. Perhaps a networking reception courtesy of Goldman will firm my resolve. Or maybe a new customer or tax break or subsidy will push me along. Guess which one I'm not betting on?