Access to Capital

For America’s Main Street businesses, having access to capital means the difference between stocking shelves or hanging for sale signs, creating jobs or contributing to layoffs, exploring new technologies and new markets or stunting their own growth and potential.

The Committee on Small Business & Entrepreneurship oversees the U.S. Small Business Administration’s (SBA) loan and venture capital programs. Because credit cards have become an increasing means of quick capital for small firms because of the credit crunch, the Committee also monitors the credit card industry. In fact, credit cards have overwhelmingly become the largest source of financing for small firms – with small business use of credit cards increasing from 16 to 44 percent from 1993 to 2008. As of April 2009, credit cards made up the largest source of small business financing at 59 percent, according to the National Small Business Association.

The use of credit cards has increased as entrepreneurs struggle to acquire bank loans, and specifically, SBA loans. More than 65 percent of banks have tightened lending on their 7(a) and 504 loans, which make up only 5 percent of financing for small businesses but represent 40 percent of their long-term capital. In 2007, more than 824,000 jobs were created or retained because of these programs. Additionally, the microloan program - which proportionally helps more women and minorities than other loan programs - provides loans of $35,000 or less to entrepreneurs. These mostly non-profit entities have seen their demand grow by as much as 75 percent as banks turn down borrowers.

The Committee also oversees the Small Business Investment Company (SBIC) and New Markets Venture Capital (NMVC) programs, which provide venture capital financing to small firms. SBICs and NMVCs differ from traditional venture capital firms in that they make smaller deals, between $250,000 and $5 million and spread their investments more broadly around the country and to a bigger variety of industries.

The American Recovery and Reinvestment Act took bold steps to increase access to capital for the nation’s entrepreneurs by temporarily eliminating many fees on SBA-backed loans and increasing the guarantee on government-backed loans to 90 percent on SBA’s largest loan program. The Act also included provisions to jumpstart the secondary market for SBA loans so banks could loan again. More than $50 million in microloans and management assistance also went to helping our smallest businesses adjust to the tough economy and to the unemployed to start their own companies. Additionally, SBA also implemented a temporary emergency loan program to help entrepreneurs in need of immediate help. Over time, these provisions will pump about $16 billion in loans and venture capital into small businesses in our communities, creating or saving thousands of jobs.