Advocacy Report: Small Exporters Hit Hardest by Poor Bank Health

Recently, the U.S. Small Business Administration Office of Advocacy released a new report entitled, “The Impact of Credit Availability on Small Business Exporters” which examines how the Great Recession impacted small exporters and their ability to garner financing. NSBA data over the past five years shows that, overall, small businesses are more able to garner capital today than they have been in the last four years.

Among the key findings in the Advocacy report:

• Small firm share of exports declines in response to deterioration in bank health and the adverse impact is greater for exporters in industries that rely more on external finance.
• The adverse effects of deterioration in bank health (including capital, liquidity, and nonperforming loan ratios) appear concentrated among exporting firms with fewer than 100 employees.
• Deterioration in large bank health within a state, measured by the capital ratio and nonperforming loan ratio, has stronger adverse effects on the exports of SMEs than on larger firms.

In suggesting recommendations to address the issue, the report calls for: improving the overall health of the U.S. banking system; encouraging the Consumer Financial Protection Bureau to examine the constraints on banks and FICO scores to improve credit and lending to small business exporters; and increasing assistance from the U.S. Export Assistance Centers, SBA, Export-Import Bank and various other federal programs. The report also calls for a focus on assistance to firms with fewer than 20 employees.

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