While small businesses create most jobs and economic output, today's tight credit conditions could squeeze them out of the inevitable economic recovery, a leading small-business advocate said Wednesday.
The recession that began a year ago meant that "suddenly, the small-business water got turned off. They lost access to capital," said local entrepreneur Marilyn Landis, 2008 chair of the National Small Business Association.
"We have to be part of this recovery. We have to be involved," Landis told members of the Economic Club of Pittsburgh at Omni William Penn Hotel, Downtown.
Landis and other small-business leaders plan to meet today with members of President-elect Barack Obama's transition team to express concern about the health of small business. Chief among them is access to capital, especially from the Small Business Administration.
"I'm going to tell them the SBA, as we know it, is broken," said Landis, president of Basic Business Concepts Inc., North Side, a small-business consultant. She also chairs SMC Business Councils, Churchill, which has about 2,300, small-business members in the region.
Landis said the federal agency has hurt small-business credit in recent years by "finding more ways to get out of guaranteeing SBA loans" and shifting administrative costs onto banks that make SBA-backed loans. Such measures have led many banks to stop making SBA loans and have stalled the pooling of such loans into securities and their sales to investors -- a process that increases money available for more loans.
"In the last month, about half the Top 10 SBA lenders in the country have shut down" or sharply curtailed their SBA loan programs, including CIT and Comerica, said Landis. As a result, SBA-backed loans for the year ended Sept. 30 dropped by 30 percent.
The government's financial bailout "can't just focus on the too-big-to-fail" corporations, such as American International Group (AIG) or Fannie Mae and Freddie Mac, said Landis. She also said the SBA should widen its credit mission to include direct loans to small businesses -- defined as those with up to 500 employees.
Small businesses' output of goods and services represents about 60 percent of non-farm, U.S. gross domestic product. And small businesses have created about 93 percent, or 21.9 million, of the new jobs in America since 1989, said Landis, citing association figures.
Through the third quarter of this recessionary year, however, small businesses have created only about 2 percent of U.S. jobs, she said. A survey by her association in August, for instance, showed that 44 percent of its 150,000 small-business members were not filling open positions.
"We're in the teeth of a very nasty recession," said Robert Dye, senior economist for PNC Financial Services Group yesterday, calling the 533,000 lost jobs in November "a very sobering statistic."
Credit for small businesses currently is "very, very tight," said Dye, but he projects lending to loosen up at bit "at least by mid-year."
No comments:
Post a Comment