When Jose Rodriguez opened OFBS NOW, a small insurance and brokerage agency in Pasadena, he knew that one day he might want to take out a loan to grow his business. After three years of success, he’s getting ready to take that next step — but he has some trepidation.
“I’ve seen a lot of my small business peers take out bad loans and become trapped in cycles of debt,” said Rodriguez. “Before taking out a loan, I wanted to make sure I had all the right information so I didn’t fall victim to predatory lending.”
Entrepreneurs aren’t afraid of taking risks and finding new ways to tackle old problems, which is a reason why small businesses create two-thirds of all new jobs and support 55 percent of all jobs. Without small businesses, our economy – and our local communities – would crumble. That’s why it’s important to take time to appreciate our country’s entrepreneurs during November, which is National Entrepreneurship Month.
Whether entrepreneurs are creating jobs, pushing important new ideas or simply brightening up the main street of town, their hard work is vital to our economic fabric. But small business owners face too many challenges that keep their businesses from thriving. During National Entrepreneurship Month, we should focus on what we can do to help fulfill the promise of the small business economy.
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.
Washington spends a lot of time talking about the importance of small businesses – but not nearly enough time passing legislation that actually helps small businesses grow and thrive.
Small businesses create two-thirds of all new jobs, and have supported 55 percent of all jobs since the 1970s. In cities hit hard by the recession, like Detroit, small employers have been particularly vital in rebuilding struggling neighborhoods. And, entrepreneurs continue to be leaders in innovating and finding better ways to solve old problems.
Clearly, small businesses are crucial to keeping our economy humming and our communities strong. Yet, Washington is more focused on paying lip service to small businesses than actually passing policies that help them thrive.
The Washington Post
The June 30 news article “Conservatives win on Export-Import Bank. Will it last?” outlines the politics surrounding the expiration of the Export-Import Bank’s charter but failed to note the effect this will have on small businesses. Once the charter expired at midnight June 30, the bank could no longer provide new loans or make new transactions through its credit insurance program. This is devastating to small exporters and entrepreneurs looking to expand their businesses to international markets.
The Export-Import Bank provides an important resource to small businesses by filling in the gaps in traditional financing and partnering with private-sector lenders to provide loans and credit that help foreign purchasers buy U.S.-made goods. The bank also offers credit insurance to cover nonpayment from foreign buyers.
Many small businesses rely on the bank. In fact, nearly 90 percent of the Export-Import Bank’s transactions in 2014 helped U.S. small businesses.
Ninety-eight percent of the United States’ almost 300,000 exporters are small and medium-size businesses. Lawmakers should reauthorize the Export-Import Bank’s charter now to ensure that our nation’s small exporters have the tools they need to thrive.