Not all small businesses are experiencing a credit crunch

“The biggest problem faced by small businesses is not access to credit but a shortage of customers,” according to Temple University professor Bill Dunkelberg, who serves as chief economist of the National Federation of Independent Business (NFIB).* For the past 35 years, Dunkelberg has managed for NFIB, the oldest, continuous tracking survey of small business economic trends.

A week ago, Bill provided an historical context for the current credit situation related to small businesses in this guest-post for a CNBC blog. In it, he notes a rather significant (a gargantuan fact) you never hear when any discussion of small business access to credit is mentioned in the media: 40% of small businesses operate without any loans, ever. They don’t need loans because they have enough capital to operate without a loan.

So, right off, there is no credit problem for 40% of small businesses.

Secondly, because NFIB and Bill have tracked small business sentiment for 35 years, he has the data to show that in 1979, 30% of small business owners were signaling a concern with accessing credit while only 15% are today. Please note, 15% is a significant percentage and historically high number of small business owners who are concerned with credit problems — a percentage significant enough to be of concern and that could affect the over-all economy, but….

Compare that analysis from an economist who has tracked small business sentiment for over three decades vs. what the CEO of Office Depot, Steve Oland, told a gathering of U.S. CEOs yesterday:

“If you look at every small business, they almost always took out a second mortgage on their house, or (tapped) home equity lines of credit. But in this economic disaster it’s been all about housing-led economic downfall, so those lines of cash are not available for small businesses…We’re very pessimistic about the chances for a big bounce recovery.”

So there you have it: An economist with 35 years of tracking data says 15% of small business owners indicate they have concerns with access to credit vs. a corporate CEO who says “every small business takes out second mortgages on their house” to run their business and they can’t now, so his company is pessimistic about an economic recovery.

Don’t get me wrong: I’m not suggesting that small businesses are out there borrowing away so they can go buy stuff at Office Depot, but what I am saying is this: Orland is barking up the wrong tree.

Bonus: After posting this, I discovered
this video of Bill Dunkelberg debating
this topic on CNBC yesterday.

And I also know this: Individual small businesses experience credit crises, no matter what the economy is doing. I’ve experienced a small business credit crisis personally, big time, before. Indeed, a credit crisis related to a specific small business once forced me to close it. So I know what a catastrophe that can be.

But Odland — and a chorus of others — are not talking about the perpetual credit crunch facing anyone who runs a small business, no matter what the overall economic cycle may be. Odland is saying right now, the inability for small businesses to access capital has his company “pessimistic about the chances for a big bounce recovery.”

While I can appreciate Mr. Odland’s desire to manage expectations regarding the share-price of Office Depot stock, he needs to find another hook than “small business access to capital” to hang his doomsaying on.

*NFIB is a client of Hammock Inc. This post is my personal opinion and has nothing to do with any work we do for any client.