Entrepreneurs are a crucial part of our economic fabric. They create jobs, challenge convention and find new ways to solve old problems. But U.S. entrepreneurship is on the decline. The number of companies less than a year old as a share of all businesses has fallen nearly 44 percent between 1978 and 2012, and in 2008, we hit a disturbing milestone: The percentage of new businesses created that year was smaller than the percentage of businesses that closed down. That’s a serious problem for our economy, which depends on new businesses to hire and pump new blood into our markets.
What prompted this turn for the worse? Many factors may have contributed, but one development is having a definite impact: It’s become harder for entrepreneurs to access loans or other sources of funding for their businesses. The recession choked off many traditional sources of financing, with a particular impact on bank loans. In fact, many banks, still cautious from the downturn, have reduced or eliminated loans valued below $250,000. Other banks simply won’t lend to businesses with annual revenues of less than $2 million. This change has hit small businesses particularly hard, as 68 percent of small businesses seek loans of $250,000 or less, and 50 percent seek loans of $100,000 or less.