By Frank Knapp Jr.

Small businesses are paying the price for an economic crisis they didn't create. To find solutions to this crisis, our government needs to listen to small-business owners, not the financial behemoths that caused the meltdown and then passed the buck.

When Tom Ledbetter became facilitator of training programs for entrepreneurs and small-business owners in Columbia, S.C., graduates typically would be able to take action to achieve their goals. Not anymore. Now, classes are smaller and graduates routinely are frozen out of financing necessary for them to pursue their dreams.

More and more small businesses are being rejected for loans. It doesn’t matter what the business is; whether it be a glass company in Charleston with 80 employees, an auto parts company with orders in hand from Honda, a Greenville cabinet-making business with large orders pending, a multi-generation Columbia business looking to diversify by putting up $2 million and prime property, or a Hilton Head construction supply company that had never missed a loan payment—all have been rejected by lenders.

Management consultants familiar with these banking decisions have called them illogical and unreasonable. Yet, they have become routine in today’s lending environment.

At a recent conference of Southeastern Small Business Lenders, the consensus was that for small businesses to qualify for loans, they'd have to change -- become more “credit worthy,” be growing or stable and hold more personal assets. Never mind that many creditworthy businesses are already being rejected for loans.

This is an obvious recipe for a stagnant economy for the next three or more years.

At the same conference, a leading Georgia economist told the audience that small businesses can and will create most of the new jobs our economy needs. Everyone nodded in agreement.

Small businesses will lead us out of this economic crisis -- if we let them. Congress must insist that large financial institutions start making loans, infuse funds into community banks for the same purpose, and raise the credit union business-lending cap.

However, even if we increase lending to small businesses to energize our economy, we must make sure small businesses never again pay the price for abusive and greedy behavior by major financial institutions.

The South Carolina Small Business Chamber of Commerce has joined business organizations such as the U.S. Hispanic Chamber of Commerce, Business for Shared Prosperity, American Business Leaders for Financial Reform and the Main Street Alliance, in support of the proposed Consumer Financial Protection Agency (CFPA).

The CFPA would be an independent federal agency that promotes financial product safety, exposes unsafe products and services, and encourages accountability and fair competition.

Unfortunately, the U.S. Chamber of Commerce opposes the CFPA, saying that it would choke off credit to small businesses. The chamber is simply out of touch with the realities of the present crisis.

With annual dues of $50,000 and more, the Chamber clearly does not represent small businesses. Internal Revenue Service documents show that in 2008 the organization received a third of its revenue from a mere 19 members -- each giving more than $1 million -- the largest donation being $15.3 million.

While the chamber cries crocodile tears for small businesses, it in truth represents the financial giants responsible for today's economic crisis. These big-dues-paying chamber members were first in line for bailouts and loans from the federal government and now oppose government oversight offered by a CFPA.

South Carolina's 103,000 small businesses need federal action to restore effective lending, empower smaller financial institutions with an ability to make more small-business loans, and protect the country from future economic turmoil. They need the CFPA.

Knapp is president and CEO of The South Carolina Small Business Chamber of Commerce.
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