STATEMENT
Of the Honorable Nydia M. Velázquez, Chairwoman
United States House of Representatives, Committee on Small Business
Full Committee Hearing “Creating Opportunities for Small Businesses
in an Economic Recovery ”
Tuesday October 28, 2008 10 a.m.

This September-- in the face of a collapsing housing market and a staggering crash on Wall Street--Congress took action. Since then, talk of the growing financial crisis has dominated American conversation. From Capital Hill Hearing Rooms and Newspaper Editorial Boards to Kitchen Tables across the country, it seems everyone has a theory about how we got into this mess. And now, of course, everyone has an opinion on how we should get out of it.

Congress is now contemplating the next steps in stemming the financial fallout. As the process moves forward, countless economic models and philosophies are up for consideration. But while it is all well and good to discuss the theory of financial crisis, it is far more important to hear from the people who are living it.  It is far more important to understand and act on what Main Street is actually facing. In today’s hearing, we will do just that. 

This morning, we will hear from small business owners who are experiencing the full effects of the current downturn. Like the rest of the nation, they have watched their home values plummet and their 401k’s evaporate. Now, they are seeing their piece of the American dream suffer, too.

This committee recently compiled a report on the effects of the financial crisis on small businesses. The results of the study, which we are releasing today, were nothing short of astounding. As today’s witnesses can attest, small businesses in every corner of the country-- spanning every segment of the economy-- are suffering. The reality is that many small firms are struggling to meet the most basic obligations, such as making payroll and stocking their shelves.  Not surprisingly, the credit crunch is largely to blame for this. And the extent to which that is true is quite startling.

Small businesses are facing credit lines that have been drastically reduced and, in some cases, revoked altogether. The recent Federal Reserve Senior Loan Officer survey found that 65 percent of lenders are enforcing stricter loan standards. That figure is up a full 58 percent from one year earlier.  

Even small firms that have managed to make ends meet are now abandoning plans for growth-- efforts that would otherwise create jobs. According to the National Federation of Independent Businesses' monthly Index, few small firms have immediate plans to expand or hire additional workers.

During past recessions, the Small Business Administration has served as a lifeline for struggling startups. Unfortunately, even these programs are on the decline. With SBA funding down 25 percent from 2007, many fledgling companies--the sort that drive innovation and expand industries -- may never get off the ground. 

There are a lot of different takes on the current financial crisis, and even more opinions on how we should dig our way out of it. But regardless of your thoughts on the matter, one thing is very clear-- small businesses will be the key to economic turnaround.

Whether it is by expanding the SBA’s role or providing targeted tax relief, entrepreneurs must have access to all the tools they need. They have powered this country out of other recessions, and they can do it again today.

While current circumstances may be different from those in the past, the blueprint for recovery remains the same. More jobs, and greater economic growth--that’s the formula we need, and that’s the formula small businesses can provide.