Small Business Finance News

SBA Finds Direct Connection Between Small Business Lending And Export Levels

Written by Tim Morral
Published: 4/17/2013

New study demonstrates that declining small business exports can be attributed to a lack of financing for small companies.

Basic business theory dictates that small businesses need access to capital for growth and expansion. But a new study by the Small Business Administration (SBA) shows that a small business financing and small business exports are more closely connected than previously believed.

SBA Small Business Loans and Exports

According to Small Business Trends, SBA researchers initiated a formal study after observing a steep decline in small business exports in 2008 and 2009. The report, titled "The Impact of Credit Availability on Small Business Exports", concluded that small business exporters are extremely sensitive to fluctuations in available financing. The study also showed that large exporters don't depend on financing nearly as much as their small business counterparts.

"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, the SBA's 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."

Getting business loans from banks is often a challenge for small companies. In addition to proving their ability to repay the loan on time, small business borrowers are usually required to provide collateral and other assurances, including SBA loan guarantees.

In addition to calling for lenders to make more funds available to small businesses, the SBA report calls for policies that improve small business owners' access to credit lines and urges policymakers to re-evaluate the limitations imposed on banks for small business lending.

To further promote small business exports, policymakers are also encouraged to direct entrepreneurs to the U.S. Export Assistance center for assistance in improving their export capabilities.

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