Since early in 2008, NSBA has been warning of the dire implications the credit crunch has for small business. As an early and outspoken advocate for addressing capital needs of America’s small-business throughout the economic downturn, NSBA believes strongly that the time to fix these problems is now. The most critical component for small-business owners as they make their way out of a recession is ability to grow, which means availability of capital. Simply, growth requires cash.

Small businesses, by their very nature, have always faced unique challenges in their attempts to secure financing. Never have these challenges—and the broad implications they have on the overall economy—been more pronounced than they are today. As the U.S. economy begins to show a few glimmers of hope and business optimism rebounds from record-lows, small business access to affordable capital is an absolute must to push the economy upward.

Historically, small businesses have been the catalyst that brings the U.S. out of a recession, through the creation of millions of new, small firms and new jobs. According to SBA’s Small Business Economic Indicators for 2003, when the economy gained momentum after the previous downturn in the early 1990s, firms with fewer than 500 employees increased their net employment in the first year after the recession, while large firms continued to shrink. From March 2000 to March 2001, small firms added 1.15 million net new jobs while large firms lost 0.15 million net new jobs. Additionally, in the 2003 economic rebound, there was an increase of 0.3 percent in small employer firms, and self-employed firms increased 3.7 percent in 2003.

Unfortunately, today’s entrepreneurs are severely limited in their ability to finance a new business venture through leveraging the value of their home, borrowing from friends and family or getting a traditional loan, forcing many to rely on the volatile world of credit cards. According to the NSBA 2009 Mid-Year Economic Report, 38 percent of small-business respondents were subject to a decrease on their lines of credit or credit card limits through no fault of their own. These actions negatively impact the business owner’s credit score and will have lasting negative implications on their ability to get financing for years down the road.

Compounding matters, the Federal Reserve reported in its July 2009 Senior Loan Officer Opinion Survey that banks continue to tighten standards and terms on all major types of loans to businesses, and expect these tightened standards to remain throughout 2010. Furthermore, 80 percent of small-business owners surveyed by NSBA report having been negatively impacted by the credit crunch in the first six months of 2009—up from 67 percent one year ago.

The longer Congress and the administration wait to address small-business owners’ need for capital, the longer and more painful any economic recovery for the U.S. will be. While NSBA’s members are feeling slightly more optimistic about their future than they were six months ago, optimism alone won’t help them create new jobs and open new businesses.

The time for action is now.

Todd McCracken, President

Keith Ashmus, Chair