Published
December 05, 2017
Small businesses are the engine of our economy, creating two out of three new jobs across the country and enriching our communities in myriad ways. Why then do we find our policymakers so often creating new laws or regulations that hinder their ability to grow?
In the aftermath of the 2008 financial crisis, many of the very people who said they stood for Main Street supported legislation that did the very opposite. New regulations imposed on community and regional banks now make it more difficult for Main Street businesses to obtain financing to get started, sustain their operations, make payroll, and continue to grow and create new, good-paying jobs.
In September, the Census Bureau reported that only 414,000 small businesses were founded in 2015, a 26% decline from the 558,000 small businesses that were founded in 2006. If small businesses are the engine, then credit is the fuel that keeps that engine humming – and therein lies the problem. Based on data from federal banking regulators the number of small business loans has decreased by roughly 43% since the recession.
We hear this regularly from small business owners, too. For instance, Warren Brown, who owns a booming cake business here in Washington, D.C., told us earlier this year:
We’ve had a lot of challenges trying to find access the credit and capital, and it has put a lot of pressure on my business. I’d rather not spend my time searching for capital. I’d rather spend my time developing my business.
The good news: Something can be done, and businesses from around the country are letting members of Congress know they need to act. The U.S. Chamber’s Center for Capital Markets Competitiveness (CCMC) recently released the “Financing Main Street Agenda,” which puts forth common sense reforms to restore Main Street lending. Shortly after the agenda’s release, more than 100 state and local chambers signed a letter calling on Congress to pursue such reforms for community, mid-size and regional banks, which would help empower Main Street businesses.
The signers represent Main Street business in most states, evidence of the wide level of support that exists across the country for a bipartisan, commonsense approach to reforming banking regulations. This also shows how wide-spread the problem is these business are facing. According to U.S. Chamber surveys, only 31% of small business believe credit conditions are improving. There are signs though that things are begin to change.
Republicans and Democrats in the Senate are starting to come together around reforms to Dodd-Frank like they haven’t in the past. Why? What changed? It’s because they’re hearing about the importance of small business financing and access to capital from business leaders and constituents in their towns and states. That’s what’s causing them to come forward and to say: “We need to fix this.”
We are seeing these first steps in bipartisan reform with S. 2155, the “Economic Growth, Regulatory Relief, and Consumer Protection Act.” The bill provides much needed relief to Main Street businesses and consumers, most importantly, raising the asset threshold for systemic risk regulation from $50 billion to $250 billion. This increase will be a step forward to providing relief to community and regional banks, enabling them to provide the financial resources Main Street needs to grow.
We’re just getting started. Though these lawmakers should be commended for taking these early steps, they are only the first steps. In order to ensure Congress follows through, they need to continue to hear from Main Street business leaders across the country that legislation that unlocks small business lending must be a priority.
Learn more atFinancingGrowth.com
About the authors
Tom Quaadman
Tom Quaadman develops and executes strategic policies to implement a global corporate financial reporting system, address ongoing attempts of minority shareholder abuse of the proxy system, communicate the benefits of efficient American capital markets, and promote an innovation economy and the long-term interests of all investors.
