Small businesses need funds to compete

U.S. Treasury Secretary Timothy Geithner on Tuesday told policy makers and entrepreneurs that U.S. small businesses need greater access to capital to spur innovation.

"The financial crisis caused a great deal of damage to the capacity of innovators to access capital, and we can't promote innovation and investment in the United States unless we help innovative companies get the funding they need to succeed," Geithner said in remarks prepared for a Treasury-sponsored conference.

Credit markets froze in 2008, making it difficult to impossible for start-ups to access financing from venture capital funds, banks and other sources. The overall situation has improved, but the Obama administration still sees lingering effects from the economic crisis – with more difficulty tapping equity markets and more stringent requirements from other would-be sources of funding.

"The recession made the hurdles higher for America's entrepreneurs," Small Business Administration Administrator Karen Mills said at the conference. "They're having to wait longer to get access. They have to show more cash. They have to access more cash and more customers before they even talk to somebody about the next stage of financing."

As a result, many potentially high-growth companies are putting development plans on the shelf, Mills said.

The administration has been pushing to demonstrate its concern for small businesses as it looks to repair relations with the business community and spur job growth. The SBA estimates that small companies generate about two-thirds of new jobs in the country. The unemployment rate, meanwhile, remains elevated at 8.9 percent.

One of last year's big initiatives was a small-business jobs act. Geithner said Tuesday that three states – Connecticut, Missouri and Vermont – would receive federal funding under the law.

Geithner said solutions could range from tax incentives and direct lending to "the innovative and alternative, such as creating a way to efficiently pool investments in small companies."

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