Rep. Graves: Small Business Credit Is Key To Improving Economy

It is clear that after two years and billions of dollars in failed stimulus funds, the President's economic policies are not working.

Unemployment remains at over nine percent and the number of new jobs created in May was at an all time low. If we want to get our economy back on track, we must look for ways to lessen the burden on our true job creators: small businesses. One of the most significant obstacles faced by our small businesses during this tumultuous period has been access to capital to survive, thrive, and hire more workers.

Small businesses create 60 to 80 percent of our new jobs and employ over half of the country's private sector workforce, but a consistent flow of credit is critical for their success. Small businesses lack the resources of their larger counterparts and rely on financing to carry out their daily operations. Without it they would be unable to replenish inventory or purchase new equipment and many would simply cease to exist. Small firms also need diverse ways to access capital to start their business, invest in their company, and meet unexpected challenges.

Lester Lefkowitz | Stone | Getty Images

As Chairman of the House Committee on Small Business, I am particularly focused on ways to increase small company access to capital and bridge the gap between lenders and borrowers.

Recently, the Committee held a hearing to examine this important issue, and we heard firsthand from a small business owner, two bankers and an economist on how small business lending continues to be a problem in this economy.

Bill Hall, the owner of five Dairy Queen franchises in Ft. Worth, TX, testified about his struggle to obtain capital in recent years, "The small businesses that create six out of every 10 jobs in America - they can't squeeze any more blood out of the stone. They need to borrow to keep up with the competition. Yet commercial credit...is not flowing to small businesses."

This issue also relates to lenders, who claim to have capital available but struggle with the risk associated with small business borrowers and the inconsistency of federal lending regulators. Lynn Ozer, Executive Vice President of Susquehanna Bank in Pottstown, PA, in a recent hearing said that the economic circumstances of the last several years combined with increased federal banking regulations have created the, "Perfect storm of circumstances that together serve to stifle banks' abilities to make credit available to small businesses."

And when asked about whether government regulations were restraining or restricting the lending practices for small banks, she responded, "What we found is that the FDIC regulators are inconsistently applying regulations throughout the banking community."

In order to get business owners like Mr. Hall the capital they need and bankers like Ms. Ozer to start lending again, it is imperative that we adopt policies that support functional capital markets without imposing undue restrictions on providers of debt and equity capital.

The Small Business Administration (SBA) programs have provided some relief to those small businesses desperate for capital. These programs are not without their flaws, and Congress must remove barriers that prevent participation in and utilization of the SBA financing programs.

Further, these programs can only provide temporary relief from the challenges posed by much larger issues.

The precarious state of our economy, combined with inconsistent, and often unnecessary, overregulation by the Obama administration, has restricted small business access to capital. Simply put, their growth has been stifled by their inability to borrow, among other things. When it comes to turning our economy around and supporting our small businesses, Washington's focus needs to change. Instead of throwing billions of dollars in stimulus funding at the market, the government needs to bring stability and predictability to the lending community and our economy as a whole and then stand aside and let the business community prosper.

Congressman Sam Graves represents Missouri's Sixth Congressional District. In Congress, Rep. Graves serves as the Chairman of the Small Business Committee.