Small Business in America is Being Starved for Capital

Or, Entrepreneurship in the United States is in Decline, Part IV.

Those that keep up with my blog have read a few pieces about this disastrous trend here, and now we’ve got further evidence, of just how bad it really is.

New businesses start-ups are down from 15% of the economy 20 years ago – all the way down to 8% today. That’s a nasty stat.

Small and medium size businesses are paying twice the corporate tax rate of large corporations. That’s an even nastier stat.

Regulations and government financing programs tilt the playing field even more dramatically in favor of large and older businesses. Unfortunately larger size and older businesses are the very same ones that don’t create new jobs. Now we get more data demonstrating that small size businesses also have had a tough time getting loans, since 2008!

According to the Federal Deposit Insurance Corp (FDIC) banks held only $585 billion in loans to small businesses, up 1% from last September. Sound good? Not really, since that number is still 18% less than the peak of $711 billion in 2008.

That’s right, the total amount loaned out right now to the small business community is still below the levels at the beginning of this economic debacle. Another way of looking at that number is that the small business community, badly in need of credit, after struggling through 6 years of an undeclared Depression, has $125 Billion less in loans on the books.

It’s not just the amount of money available to small businesses that has declined.

The total number of loans for $1 million — or less — held by banks is down 14% to 23.5 million since 2008. Translation? In one third of the nation; small-business lending remains below 2005 levels. That was almost 10 years ago. Ten years is a long time for a large economy not to make any progress. That last estimate isn’t mine; it’s from PayNet Inc., a Skokie, Ill., tracker of loans by banks, corporations and alternative lenders such as finance companies.

Lending itself, to all size businesses combined — did not contract — in fact it rose by 9% since 2008. So, large businesses and medium size businesses, have been able to borrow over $500 billion extra to expand, survive, and have received the additional credit to do all that, while simultaneously, the small business community has been starved for capital by a more than a $100 billion reduction in available credit. If that seems really stupid to you, it’s because it is.

The government is in control of this process and they’ve done a terrible job of protecting the most important segment of the economy; the part that creates new jobs, new corporations, new business models, and introduces the most innovation at the consumer level.

That innovation and accompanying increase in marginal productivity is the source of eventual prosperity for all.

Shame on the Federal Reserve, Wall Street, the White House, and Congress, America’s small business owners don’t deserve this treatment, and hurting them, has hurt us all.

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About karlspain

20 year Newspaperman. Lifelong Inventor. Wrote 2 books so far, working on more. The Revelation, 1st book, about your brain & the universe, and math. Hooked together! God I trust, America I love, 2nd book, is the biography of Aris Mardirossian, a great man. Also owned a software company, an IT integration company, a gas station and a fuzzy logic software title along the way.
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