During the financial crisis, credit froze and employment plummeted, slamming our economy into a brick wall. While our economy has started to recover little by little with Wall Street demonstrating a resurgence back to pre-crisis highs, lack of capital access for small businesses is still asphyxiating job creation and preventing this critical sector from demonstrating the same resilience. It is a tale of two economies.

While some businesses and individual tax payers have fully recovered and then some from the recession, many others are not out of the dark. Big investors, major U.S. companies and financial institutions are sitting on piles of cash, while Main Street is still gasping for air as credit remains very tight. Why? Because room for error shrinks the smaller the financing, increasing relative risk. There is simply less room for error in a $10,000 loan than a $10 million loan. Underwriting small loans is often as or more challenging than for large ones.


Small businesses create two-thirds of this nation’s net new jobs each year, so the effect of our economy’s lack of lending on Main Street means that America’s job creation engine is stuck in neutral – and our national unemployment rate dangling like a Sword of Damocles over our heads. Persistent unemployment corrodes our communities and creates long-term costs that our nation is paying and will pay for – now and later.

Policymakers must leave partisan ideology at the door and get to work to provide real solutions to solving access to credit for small business owners. President Obama and the Congress can fuel significant job creation in four steps:

1.      Increase small loans and microlending. The SBA’s Small Loan Advantage and Community Advantage should be given more support by the Administration and by Congress. These little-known programs offer small working capital loans of up to $250,000 that can turn our nation’s entrepreneurs into creating new jobs and opportunities.

2.      Pass reform measures that would save taxpayer dollars and offer zero-cost financing mechanisms for small businesses. One example -- over 250 of the nation’s nonprofit SBA lenders, members of the National Association of Development Companies (NADCO) - have offered to impose fees on themselves in exchange for permanent reinstatement of a temporary debt refinancing program that was instituted by the Jobs Act of 2010. The popular program, part of the Real Estate Advantage (504) Loan Program, helped 2700 businesses across America refinance their old, expensive commercial real estate debt, unlocking their own equity to invest in creating and sustaining jobs. Small businesses saved as much as $20,000 month on lower interest payments to banks, investing it in job creation and retention.

3.      Create a White House Task Force on Small Business to coordinate a direct response to the problem involving financial regulators, the U.S. Small Business Administration (SBA), Treasury, the House and Senate Small Business Committees, small business and lender trades associations. There are too many well-intentioned, disconnected initiatives and a woeful lack of a coordination or focus on this issue. What is needed is a surge of lending and smart policy to reinforce our Main Streets.

4.      Recognize local heroes. Members of Congress and local officials should celebrate the SBA loans awarded in their communities with letters of congratulation to business owners. Small businesses are our local, unsung heroes and should be recognized accordingly! 

In a recent Pepperdine University study, 60 percent of small businesses said lack of financing was inhibiting their growth, while 50 percent said it was preventing them from hiring new employees. If 50 percent of the nation’s small businesses aren’t hiring because they can’t get financing, lack of capital access is the elephant in the room that threatens to trample whatever greet shoots of progress the economy may be showing.

With interest rates increasing and uncertainty still undermining confidence, small businesses continue to be pessimistic about their ability to get the financing they need. We should be doing everything in our power to give small businesses support and the opportunity to be the major economic drivers that they are.

Solomon is president & CEO of the National Association of Development Companies (NADCO), representing small business lenders including America’s 250 SBA Certified Development Companies. Last year, the industry delivered nearly $5 billion in small loans to 7200 small businesses.