Look to the east from Lookout Mountain and Colorado is flat. Turn the other way and Colorado soars. Small businesses in Colorado are eager to recover from the recession; they are looking west, but the trails are headed the wrong way. President Obama is correct that health insurance costs are a challenge in small businesses (mine included), but we don't need to resolve a complex national debate on health care to help small companies. There is a quick and relatively simple fix available. Easier access to cash is what will enable small and emerging companies to start hiring and our Colorado economy to start climbing.
Colorado is a land of small business. Over 98% of Colorado companies fit the Small Business Administration definition of small business, under 500 employees, and the vast majority of those are truly small, under 20 employees. Of course, the large employers clustered in the Fort-Collins-Boulder-Denver-almost-to-Colorado-Springs string city of the Front Range employ numbers disproportionate to their 2% status, but still it is small businesses that sustain our economy and feed our sense of Western individualism.
The SBA's Office of Advocacy reports that small businesses historically account for 64% of net new employment nationally. While that’s a noteworthy figure, in Colorado the “small” end of the business sector created a stunning 99.7% of the net new jobs in our state in 2004-2005. The Denver and Colorado Springs metropolitan areas together lost almost 70,000 jobs in the last 12 months; when similar data for the whole state becomes available it won’t be any brighter. How will Colorado replace those jobs? Small business.
Last week’s news of increasing unemployment rates -- chronic unemployment at 17% with the average job hunt at a record 26.2 weeks -- is disappointing but not surprising to us who work with small business. Big business economists report the problem is that firms aren’t yet willing to hire. For many small businesses “willing” is not the problem. Money is. Small companies typically lead us out of recessions because their owners are quick to recognize and act on opportunities. This time, however, small firms have depleted their cash and can’t borrow what’s needed to follow-up on emerging prospects.
The country’s primary support for small business comes in the form of government-guaranteed loans. This critical SBA program, however, made 36% fewer loans in its fiscal year ended Sept. 30 than in FY2008. Though the guarantee makes these low-risk loans, Main Street cannot convince Wall Street that small business is creditworthy. Even the nation’s emergency loan program for small business, America’s Recovery Capital (ARC), has been slow to take hold in the face of bank indifference and government red-tape.
If the lack of new jobs is hindering our recovery, then why don’t we do more to stimulate the proven engine of job creation? The resources dedicated to struggling small businesses are grossly low given the vital importance of this sector. Chuck Blakeman of Denver’s TeamNimbusWest did the math for us:
The stimulus was $787 billion dollars. This ARC program is $255 million, or three-tenths of one percent of the entire bailout. Small business is 50% of the gross domestic product but gets three-tenths of the bailout? The big businesses were given hundreds of billions of dollars in just a few weeks when not a single one of them would have been able to qualify for the $35,000 ARC loan.
I regularly meet Coloradans who own or want to own a business. Those preparing to start a new company are stymied. Sure start-ups have always been cash-challenged, but the current environment is brutal. More alarming still are the established companies with demonstrated profitability that can’t get a loan. Businesses that are ready to hire new employees are as “shovel-ready” as any big transportation and infrastructure project. We know that small businesses create jobs and do so quickly. An emphasis by politicians and banks on the nation’s small businesses that is commensurate with their large importance will create jobs in every state. Then small business-blessed Colorado, from Holly climbing to Leadville, will soar again.