Access to Capital for Small Businesses: Time for Congress to Act?

A major challenge for small businesses continues to be lack of access to capital.  While there are signs of improvement, especially as compared to 2008 and 2009, access to capital continues to be a hindrance to growth and innovation.   While TARP bailed out a number of larger financial institutions, it did little to spur small business lending. Credit lines remained stagnant for small businesses.  CompTIA has raised this issue on Capitol Hill and there is growing concern – but little consensus – on how to re-start small business lending.

The majority of American job growth and innovation comes from small companies.  We’ve conducted a number of meetings with both Senate and House small business committees to promote a $10 billion “Growth Tech Capital Initiative” for small tech companies under which qualifications and limits of loans would have been based on the ability to generate jobs, growth and exports.  

This idea was viewed with interest on Capitol Hill, and we will continue to work with member companies and Congress to support policies that genuinely assist small technology firms. We believe government spending, if any, to increase access to capital should focus on supporting companies which have a unique capacity to produce scientific and technological innovations.
 
With access to capital in mind, the House is expected to vote on legislation this week which was passed out of the House Financial Services Committee in May.   The Small Business Lending Fund Act of 2010 (H.R. 5297) would create a $30 billion fund that could be used by the U.S. Treasury Department to invest in small banks that commit to increasing their lending to small businesses; this program would terminate after a year.  Interest rates on repayment would be scaled to provide lower rates for those banks that have a greater up-tick in small business lending (so there is a clear incentive to increase small business lending).  

It also provides $2 billion to the states for state-sponsored access to capital programs for small businesses. Unlike TARP which sought to bail out failing banks, this legislation would pump capital into solid community and local banks that develop and execute a plan to increase lending to small businesses.  
  
The goal of this legislation is admirable; we certainly recognize the key role community banks play in small business lending. Even so, we must note that the immediate beneficiaries of this legislation will be the community banks, with the expectation that small businesses will benefit via a trickle-down effect.  We hope this will occur.  However, we will continue to promote direct access to capital for small businesses, beginning with the establishment of a loan fund for tech companies.  
 
Small businesses have suffered long enough:  Congress has provided direct funding to larger failing financial firms via TARP, and it now seeks to provide direct investment in our community banks.  In our view, providing a similar infusion of capital to small businesses is no less critical to our economic recovery.