In the past, the revival of small businesses helped lift the U.S. economy out of recession. But as many larger firms are getting back on solid footing and big banks have returned to profitability, small-business activity has remained unusually sluggish this time, offering little help in bringing down the unemployment rate.
Since the financial crisis, the Obama administration has created a patchwork of programs aimed at helping existing small businesses and spurring new ones. Among them: numerous tax breaks, expanded Small Business Administration loans, measures designed to get small banks lending again, efforts to help small businesses begin exporting, and public-private partnerships intended to boost start-ups and fill the venture capital void that has persisted during the crisis.
Obama has also asked federal agencies to review their regulations for ways to streamline or eliminate rules that unnecessarily burden small businesses.
“We’re trying to facilitate getting small business to be an engine of recovery,” Austan Goolsbee, chairman of the president’s Council of Economic Advisers, said in an interview. “It’s important. They should be driving the recovery.”
Demisse has taken the first steps toward turning around his coffee business, offering some hope for other entrepreneurs. In the fall, he secured a $75,000 loan from a private lender in Pennsylvania and used the money to take on new business. He’s hoping to hire an additional employee this spring.
But his experience illustrates the obstacles many small-business owners continue to encounter. The nation’s small businesses have suffered disproportionately during the downturn and continue to struggle more than their larger counterparts.
Many existing businesses, their credit lines tapped out and their revenues battered, have struggled to remain afloat, much less expand. Businesses wanting to grow have often found themselves stymied by the reluctance of banks to lend again after the crisis. New start-ups, which have fueled job creation after previous recessions, have not taken root at the same pace as in the past.
Small businesses account for more than half of private-sector employees and have generated nearly two-thirds of new jobs over the past 15 years, according to the Small Business Administration.
Experts agree that tougher access to credit has played a key role in the poor performance of small firms. “Anybody who cannot access public capital markets has found the recovery post-crisis really a struggle,” Goolsbee said. “Essentially, the financial crisis never left them.”
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