Once again we hear from Washington the same solution they seem to have for any and every economic issue — more debt.
This time the problem that they debt solution is being applied to is small business exports. In a report released by the Office of Advocacy of the SBA we are told that if only we could make more debt available to small businesses they would be able to export more products outside the US. The study says that smaller small businesses are in particular need for more governmental help with credit.
Most surveys of small business owners tell us that the weak economy and sluggish sales are their biggest problems, and not the availability of debt. Very few small business owners say that they are having problems getting the credit they need in recent surveys by the NFIB.
Tight credit is not their problem.
A recession (or however you want to characterize the current economy) that has lasted five years with continued double digit real unemployment and ongoing economic uncertainty has created tight wallets among consumers.
Add to this the complete confusion over the impact of ObamaCare and other new regulations, increasing taxes, and an attack on free markets and we can see why small businesses are so cautious right now. Many of those who have survived the last five years are just a bit shell shocked right now and in no mood to take a risk on preparing for expansion. They are not building inventories, not investing much in fixed assets, and not growing their workforces.
More debt is the last thing most small businesses need right now. Sure interest rates are low right now, but they are artificially low. Small businesses do not have the financial statements to support increased debt.
I thought one of the lessons of 2008 was that we should not be encouraging banks to give credit to those who really can’t afford it. And yet here we go again recommending that we find policy solutions to encourage banks to issue more debt for the smallest — and most fragile — small businesses. Not good policy and a lousy business decision for banks to make.
I have written before about why entrepreneurs in the US are not engaged in international commerce. American entrepreneurs are just not comfortable dealing in international markets and often don’t even consider exporting products. Americans don’t travel abroad as much as people from other parts of the world. We don’t speak second languages. It is an issue that has roots in our society and culture — not in the amount of credit available to small business.
I really appreciate your point about American entrepreneurs not being comfortable exporting products. I think there definitely has to be an international cultural mindset change for American small business owners before exporting becomes commonplace. Outside of the issue of debt, there are many other reasons small businesses don’t engage in international trade. The biggest reason, I believe, is because of the riskiness of exporting. Entrepreneurs already have a hard enough time figuring out the markets they are familiar with, must less unknown foreign markets. The chance for failure is so high. Going back to your point, I think it is crucial for Americans get outside their comfort zone and truly get to know another culture. It is only in doing this that the mainstream small business owner will take on the many risks associated with international trade.
That is an interesting reason why americans they don’t export, i always though the capital was the problem, so the point here is that american entrepreneur they need to change their mindset and start learning new languages and new culture.
I understand the hesitation of American entrepreneurs to enter foreign markets. In another post, you described the hurdles and challenges an entrepreneur must encounter to become an international exporter. Part of this is the expenses, and with a small amount of revenue and available credit, I can see how this is a challenge for many. Going into debt in order to expand a company does not always work out. It takes careful calculation to determine if international exporting is right for your company.
I like your point about Americans being uninterested in dealing with foreign markets because they are not comfortable dealing with foreign markets. I had never really thought about it, but I myself would try to avoid dealing with other countries economically. Maybe this is an issue that needs to be addressed in the public education system.
This is a very tricky topic because I believe it is very smart to venture into the foreign market, but can be difficult due to lack of supply and demand as of right now. It is risky due to the exportation of our products to the other side, but I think it could be done with the trusting of the system. I agree with your point that us Americans need to step out of our comfort zone and try for our best in our outcomes.