Access to capital: The key to unleashing small business hiring

By signing the Jumpstart our Business Startups (JOBS) Act into law April 5, President Obama signaled that both he and the U.S. Congress agree on stimulating U.S. job creation: entrepreneurial small businesses hold the key to our national economic engine, and they won’t start hiring again until they have access to capital. We can all embrace the goals within the JOBS Act and the overwhelming bipartisan support it received -- not to mention some ideas within that are downright innovative.

The timing could not be better. Numerous economic indicators suggest that the recession should be over: Stock prices are surging, gas prices are rising, unemployment is down, and hiring is up. But we simply will not fully rebound until small businesses recover.

Small businesses have always been the backbone of the US economy. More than half of all jobs historically come from small businesses, which also provide almost two thirds of new jobs. The impact is even larger within inner-city communities -- some of the hardest hit areas during the recession -- where small businesses supply 80 percent of jobs. Despite the undeniable importance of this sector, however, legislators and business leaders have rarely given small business owners what they really need to jump start the economy: access to capital.

That is, until today.

A 2012 study by Pepperdine University in partnership with Dun & Bradstreet Credibility Corp. asked small business owners their thoughts on the best policy instruments to help spur U.S. job creation. The number one answer: “increased access to capital.” Indeed, 49 percent said lack of bank loans restricted growth opportunities, and 37 percent said limited lending restricted their ability to make new hires.

Politicians making deals with big banks in the halls of Congress won’t help job creation. Economists theorizing about monetary flow won’t help job creation. News anchors recycling dismal reports about the state of the economy won’t help job creation. What will help create jobs? Real solutions that improve access to capital for Main Street businesses. 

The JOBS Act solves this problem in two ways. First, it removes restrictions for smaller companies to go public. The last time these restrictions were removed, companies such as Amazon.com, Yahoo, Netscape and others raised capital through the public markets and spurred an industry boom. Of course there were problems (Pets.com, anyone?), but under the JOBS Act once a company hits critical mass in revenues or over time the rules of Sarbanes-Oxley come back into effect.

The second approach to increasing access to capital is truly innovative: crowd funding. Rarely does government move ahead of the pack, but in this case the JOBS Act creates a new market for raising capital through micro-funding on a broad scale. Crowd funding allows companies to raise money in small increments from large groups of people, just as Wikipedia derives small snippets of content from large interconnected groups. The approach could lead to another entrepreneurial renaissance.

Mr. President, thank you for signing this bill into law!

Stibel is Chief Executive Officer of Dun & Bradstreet Credibility Corp, the leading provider of credit and credibility solutions for businesses. The company is headquartered in Los Angeles, CA, with offices throughout North America.

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