How Banks and Elected Representatives Are Destroying Your Small Business

The U.S. government cannot even define a small business effectively.

The SBA (Small Business Administration) sees a small business as:

“500 or fewer employees for most manufacturing and mining industries”

“100 or fewer employees for all wholesale trade industries”

“$6 million per year in sales receipts for most retail and service industries (with some exceptions)”

The SBA for the most part has it wrong.

A definition I like is: Any activity that provides full or part time income for any independent individual is a small business.

In other words a small business definition must be inclusive because most small businesses started as an idea in the mind of one person.

And the good businesses develop from there. Even Coca Cola started as an idea in the mind of one person.

What the SBA and elected representatives don’t seem to understand is that small businesses are the strength of our nation and the future of our country.
Here are the statistics they need to read and understand:

1. Small businesses produce 50% of our GDP.
2. Small businesses employ more than half of all private sector workers.
3. In the last decade small businesses have created close to 100% of all new jobs.

Small businesses are the most vibrant enterprises in the country.

I bet by my definition you own your own business. And I bet that it’s important to you. And I bet you’d like to see it survive, grow and prosper.

I also bet that since this banking crisis has started that a commodity you need desperately to grow your business has become tougher (if not impossible) to get and if you can get it, it’s more expensive. I’m talking about money. Cash.

Specifically money in the form of credit (lines of credit and credit cards have been hit expecially hard).

Money is the commodity that grows your idea into a business that hires people. Isn’t that what it’s going to take to get out of this mess; good ideas that lead to small businesses that lead to growth that lead to jobs. And cash is the commodity that allows the tiny business to leverage itself into the business that hires employees and builds this nation.

And what did our government do? They showered $700 billion plus on a few large businesses. Their goal, to provide liquidity in the system. Frankly I’m not seeing it. Our small business uses a line of credit on our home and when times are tight, our credit cards.

Our bank blocked our line of credit even though we have great credit and Discover sent us a letter saying they were going to boost our interest rate somewhere into the sky even though banks are getting money from the Federal Reserve at 0%-.25%. We had them close our Discover account.

The federal government established TALF (term asset-backed lending facility) to make consumer and small business loans more widely available by securitizing loans. I don’t entirely understand this process but it reduces the lenders’ costs and risks.

It’s not working. Today the securitization market for loans is 80% below what it was in 2007. And I doubt if we could walk into a bank and get a loan.

I believe small businesses are the economic strength of our nation. And I believe too big to fail means that money is going into the wrong hands. Money has to circulate and yet it’s stalled in the hands of the banks.

So 50% of the GDP and virtually 100% of the job creators are jammed up. Can’t the government see that this is not a problem; it is the problem.

My wife and I have been in small businesses since 1973 and we have never defaulted on any loan or payment in 35 years and yet we can’t expand as banks have new criteria for loaning money. Historically the criteria was: If you don’t need money, we’ve got it. Now it’s: I don’t care that you’ve had the same accounts for 30+ years and never missed a payment; you’re not credit worthy.