SBA: When Lending Declines, So Do Small Business Exports

small business exports

A sharp decline in small business exports during the financial crisis of 2008 and 2009 caused researchers to wonder. Could there be a connection between lending and small business exports? The result is a report confirming just that. As lending declines, so do small business exports.  A new report from the U.S. Small Business Administration’s Office of Advocacy lays out the data.

The report, “The Impact of Credit Availability on Small Business Exports” (PDF) looks at how “big bank” health impacts exports from the nation’s smaller businesses. It mainly considers those companies with fewer than 100 employees. The research also determines that small businesses rely on bank lending to export their goods and to do business outside the U.S. more than big businesses do.

“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,” Dr. Winslow Sargeant, the SBA’s chief counsel for advocacy, said in a statement accompanying the report. “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.”

We recently reported on another Small Business Administration announcement stating banks are lending more to small businesses. The data reflected an increase in this lending for the first time in 10 quarters during the first part of 2013.

The effect of bank health disproportionately impacts small businesses and their ability to export goods. The latest report’s findings state that “adverse effects of deterioration in bank health appear concentrated among exporting firms of fewer than 100 employees.”

The SBA Advocacy report notes that exports don’t really decline from big businesses when banks slow lending. “The smallest businesses need more access to capital to grow their businesses and export their products,” Sargeant said. He called for banks to open up more capital resources to the nation’s small businesses. The resulting boost will help the economic recovery from the recent recession he says.

To strengthen small businesses exports even more, policy shifts are needed to improve access to lines of credit and financing, the report continues. Policy makers must re-examine the constraints on banks for small business lending and link these businesses to more help from the U.S. Export Assistance Center to increase their export ability.

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Joshua Sophy Joshua Sophy is the Editor for Small Business Trends and has been a member of the team for 16 years. A professional journalist with 20 years of experience in traditional media and online media, he attended Waynesburg University and is a member of the Society of Professional Journalists. He has held roles of reporter, editor and publisher, having founded his own local newspaper, the Pottsville Free Press.