Ohio’s businesses need credit

When you’re in a race, you go as fast as you can to try to win. That’s how we generally understand competition.

But it doesn’t always work that way.

There are several tracks in the NASCAR circuit where competitors are required to use restrictor plates, a device that limits the cars’ maximum speed. You can see that the horsepower is there, the skill is there, and the potential is there. But the cars are slowed because an artificial impediment holds them back.

When you have a superior product, you make as much of it as you can and serve as many customers as you can to try to maximize your profit. That’s how we generally understand the business world.

But it doesn’t always work that way.

Lines of credit are the restrictor plates on our businesses, especially small and medium-sized manufacturers. You can see that the facilities are there, the know-how is there, and the leadership is there. But our companies are slowed because an artificial impediment holds them back.

Across Ohio, business people have told me time and again that lack of access to capital impedes them from expanding and competing. According to the Manufacturing Council, its member businesses are echoing those concerns in every corner of the nation as fiscally sound companies face this credit crunch. Credit is drying up because a sour economy has made bankers leery of being bankers.

Global reach

In Sugar Creek, Ohio, SUPERB Industries grew out of a family business started in a two-car garage 23 years ago. Today they offer precision stampings and injection molding for customers across the globe.

Sales for 2009 are up 15 percent, and orders for 2010 are up 45 percent. As demand grows, SUPERB has increased its workforce by 25 percent. But company officials report that it will be a challenge for SUPERB to secure enough working capital to sustain this rate of growth and job creation.

When American companies cannot afford to grow, we have a problem. And if we don’t fix this problem we might as well put in a call to China and ask them if they would like more of our jobs.

Powered by relatively modest loans, we can strengthen vital industries in Ohio and across the country. For example, according to the Motor and Equipment Manufacturer’s Association, an auto supply manufacturer doing $100 million in sales annually needs about $5 million in flexible capital to cover costs.

Recently President Obama has spoken of the need for banks to make capital available for small businesses. He has articulated a framework to revitalize American manufacturing. Now we need to put a program in place to see that funds actually flow to job-creating manufacturers.

That’s why I’m calling on the federal government to dedicate funds from the TARP or in the jobs bill being considered by Congress to stimulate capital lending to small and medium-sized manufacturers. They need working capital to meet existing orders and to pay for the retooling necessary to increase efficiency and pursue new markets, technologies and products.

States would serve as the intermediary, identifying a network of banks and community lenders that wish to participate and assuring that federal funds quickly find their way to manufacturers ready to retain and create jobs.

Incentives

Because they would be allocating federal funds alongside their own funds, banks and credit unions could make lending decisions without the overwhelming reluctance that guides many of their decisions now. And as businesses repay these loans, the funds would be rolled back to provide capital to other manufacturers and create even more jobs.

What’s at stake here are the companies at the very heart of the American economy. In Ohio and across the nation, more than nine out of 10 manufacturers are small and medium-sized businesses employing fewer than 500 people.

By taking these simple but essential steps, we will put capital in the hands of people who can use it to create jobs. Indeed, the Business Growth Alliance estimates that we can create millions of jobs across the United States by expanding access to capital for small manufacturers.

In a federal and state commitment to lending capital to small manufacturers, there’s logic, there’s efficiency, and there’s jobs. It’s a return to an economy guided by quality instead of squeezed by credit.

X Ted Strickland is governor of Ohio.