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Small Business Digest


Proposed Federal Regulations Would Threaten Small-Business Access to Credit, Think Tank Says

If a proposal to establish a Consumer Financial Protection Agency should be passed by Congress and signed into law, new-job creation would be discouraged and the likelihood of economic recovery would be reduced, according to a report by the  National Center for Policy Analysis.

“Since many small businesses have difficulty accessing commercial bank loans because of size or lack of credit history, small-business owners often use consumer credit, including credit cards or home-equity lines of credit to fund their companies,” said Terry Neese, NCPA Distinguished Fellow and co-author of the report.

“This new agency could cut off access to credit for many firms and raise borrowing costs for others.”

Because small businesses employ a substantial portion of all workers and are responsible for the creation of most new jobs, the ability of small businesses to borrow has significant implications for the economy. From 1987 to 2005, start-up companies with fewer than 20 employees accounted for 86.7% of net job creation in the U.S.

According to estimates by law professors at George Mason University and the University of Chicago, some of the implications would be:

• Federal credit regulations could increase consumer interest rates by more than 1.6% on average.
• Consumer borrowing would be reduced by at least 2.1%.
• Net new-job creation would fall 4.3%.

“Increased federal control over consumer credit would have unintended damaging consequences for small businesses,” said Bethany Lowe, NCPA research assistant and co-author of the report. At a time when the economy is struggling to recover, it would be a bad idea for Congress to include an additional layer of regulation that could stifle economic recovery.”

The NCPA is a Dallas-based organization that "develops and promotes private alternatives to government regulation and control."

To see the full NCPA report, log on to

Also, a Congressional Budget Office analysis of the effect of the proposed legislation can be seen at

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