Better Bank Lending Would Improve Small Business Exports

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    The Office of Advocacy, an independent office that serves as the voice for small business within the federal government, recently released a report that found improved small business lending by banks in the United States would boost exports by the smallest businesses.

    The report, called The Impact of Credit Availability on Small Business Exports, examines the relationship between the steep declines in small business lending and falling rates of small business exports during the recent recession. Small exporters with fewer than 100 employees especially felt the effects of deteriorating bank health or declines in bank lending. The effects of declining bank health on exporting were less evident for larger firms. The report defines bank health in terms of bank capital, liquidity, and nonperforming loan ratios.

    “Small businesses that export their goods and services need to compensate for the riskiness of cross-border transactions and to allow for longer transportation times to get goods to market,” said Dr. Winslow Sargeant, Chief Counsel for Advocacy. “Add to that the greater reliance of small firms on bank credit in general, and it’s easy to see how even small changes in bank health could have the effect of undermining small business exports.”

    “As policymakers focus on ways to improve the economy, the smallest businesses need more access to capital to grow their businesses and export their products,” said Dr. Sargeant. “Small businesses are playing an important role in this nation’s economic recovery, and if we want to export more American products around the world, we must improve this country’s lending environment.”

    In the report, the author, Dr. Joe Peek, also examines differences by industry and state. The full report is available on the Office of Advocacy website at http://www.sba.gov/advocacy/7540.

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