Dr. Donald Reagan, plastic surgeon, wanted to expand his business from La Jolla into North County, where, he told CityBeat, he thinks the supply of plastic surgeons is lower. Last fall, he applied to a bank for the $807,000 loan he needed to purchase and renovate a building, and he got the money. He also applied to be part of a Small Business Administration (SBA) program that would reduce some of his fees and the interest rate on the loan. Luckily for Reagan, his loan coincided with the passage of the American Recovery and Reinvestment Act in February. The new law meant that not only would he get his loan, but the SBA would also waive its loan fees, which, he says, saved him about $40,000.
‘It was just good timing,” Reagan said.
But he emphasized that it wasn't like the 5-percent reduction in his expenses really changed anything—he wouldn't be hiring any extra assistants or otherwise investing the money, and he'd already intended to buy the building.
If that's true, it kind of defeats the purpose of the $800 billion stimulus plan. The combination of tax cuts and direct government spending is supposed make consumers spend and businesses invest, creating a multiplier effect that would boost the economy. The SBA, in particular, is supposed to use its money to get people to spend more on small businesses, not continue on as if nothing new is happening. CityBeat used a database of stimulus spending compiled by the nonprofit newsroom ProPublica to call businesses receiving stimulus dollars and ask them what they were doing with their money.
Reagan's loan is called a 504 loan. The program brought a total of $5.4 million to 10 San Diego County businesses. But among the ones interviewed by CityBeat, many were barely aware they received stimulus dollars at all. Mark Steele, an architect, owner of M. W. Steele Group and a former member of the San Diego Planning Commission, got a $502,000 loan to buy a building but didn't even know he'd relieved stimulus money.
“Where's my check?” he asked CityBeat.
But the SBA also helped businesses struggling to get a loan after credit dried up last fall. Michael von Euw, of San Diego, wanted to open a Quiznos sandwich shop and a UPS store in Otay but ran into the icy wall of the credit freeze.
“We started applying for this loan in August,” he said. “We were approved initially. But then, in November, they told us that we didn't get approved because they had adopted a policy of no loans whatsoever.”
The Recovery Act expanded a program by which the SBA guarantees 90 percent of a loan a bank makes to a qualifying small business. With this support, von Euw and his partners secured $360,000 from Pacific Western Bank. The UPS store is now open, with the Quiznos expected in October.
This program has only brought $3.7 million to San Diego County since April, but it's spread out across 25 business. Like von Euw's new stores, these businesses do plan to expand and add employees, or otherwise reinvigorate the economy.
Now, that's a little more stimulating.