WASHINGTON — An economist for polling giant Gallup told a congressional committee on Wednesday that small businesses are struggling to get credit despite other signs of life in the still-fragile U.S. economy.
“We are certainly in a soft patch,” said Gallup’s chief economist Dennis Jacobe, who was testifying before the House Small Business Committee.
There have been slight improvements in credit for small businesses recently but lending is still far down from pre-recession levels, Jacobe said.
“About 30 percent of small business owners say it is difficult or very difficult to get credit right now,” Jacobe said.
Availability of capital is vital for small businesses to survive, said Democratic Rep. Nydia Velazquez of New York. “If small businesses are truly the backbone of the economy,” she said, “then the flow of capital is the lifeblood.”
Small businesses need credit to jump start job creation, said businessman William Hall, who was testifying on behalf of the International Franchise Association, the nonprofit trade group.
“We think that small business creates 6 out 10 jobs in the country,” Hall said. “There are a lot of jobs that could be created that won’t be because we don’t have access to the credit.”
There would be an explosion in job creation if businesses were financially able to hire as many people as they would like to, Jacobe said.
“We find that about 40 percent of small businesses tell us that they are hiring less people than they need,” Jacobe said.
Jobs are an absolutely vital to economic recovery, said banker Lynn Ozer, testifying on behalf of the National Association of Government Guaranteed Lenders.
The negative effect of underemployment, people who have not been looking or are not working to their full ability, is underestimated, Jacobe said.
“When we look at underemployed… the [unemployment] number goes up to 19.2 percent,” Jacobe said. The government’s job report for May is due Friday. A disappointing private-sector estimate has caused Wall Street estimates to be slashed.
The threat of higher taxes and the implementation President Barack Obama’s health care reform plan could cause employers to lay off even more workers, Hall said.
“If you start taxing, and I have to say the same about health care, we are going to lose jobs,” Hall said.
Small Business Administration loans are critical to keeping the small business community healthy, Ozer said.
Improving use of SBA programs is one way bankers are looking to help small businesses, said banker Robert Kottler of the Consumer Bankers Association. Many banks have instituted aggressive second look programs that examine declined loans to see if it could work, he said.
“We are just starting to see signs of growth in our economy but we have a ways to go,” Kottler said.
Solving the housing crisis would be a significant help to the economy and cycle back to help small business, Jacobe said.
“We need to do something about housing. I think housing has effects across the country that are underestimated…we have a broken housing finance system,” he said.