Financial Aid for Small Business

March 2, 1950

Report Outline
Government and Financing of Small Business
Federal Reserve and R. F. C. Business Loans
Proposals for Insurance of Private Loans
Plan for a New System of Capital Banks

Government and Financing of Small Business

Coming Proposal for New Aid to Small Businesses

New administration proposals to assist small business and encourage the development of new enterprises are shortly to be laid before Congress. President Truman said in his annual message, Jan. 4, that future growth of the country carried “possibilities for hundreds of thousands of new and independent businesses.” But he declared that to avoid the danger that “our constantly growing economy will fall under the control of a few dominant economic groups … we must curb monopoly and provide aids to independent business, so that it may have the credit and capital to compete in a system of free enterprise.”

The President already has recommended that Congress ease the shortage of long-term loan capital for small business by authorizing the Reconstruction Finance Corporation “to increase the maximum maturity of its business loans substantially above the present 10-year limit.” The Economic Report of Jan. 6, in which that recommendation was made, indicated that the forthcoming recommendations for additional assistance would include proposals “for encouraging private financial institutions to furnish equity capital to small and medium-sized concerns.” The Annual Economic Review of the Council of Economic Advisers, which accompanied the President's Economic Report, stressed the point that “New and small businesses are at a marked disadvantage in seeking to obtain equity capital,” and that “They also find difficulties in obtaining long-term loans.”

Warnings of Need for Aid and Prospects for Action

Special facilities for obtaining short-term and medium-term credit, through the Federal Reserve banks and the Reconstruction Finance Corporation, have been available to small business (also to large business) since 1934. There is widespread agreement that the present need is not for more or better facilities of that sort, but for assistance to small business in obtaining equity and long-term loan capital. The gap in that sector of the financial mechanism was not markedly apparent in the first postwar years, when abundant personal savings and strong consumer demand made it relatively easy to launch new enterprises and operate them profitably. But the gap is now beginning to show up, and there have been warnings that it will become more pronounced as competition in a buyer's market grows in intensity and independent business ventures find it more difficult to get started or, once started, to keep their heads above water.

ISSUE TRACKER for Related Reports
Small Business
Jun. 19, 1987  Small Business
Jan. 28, 1983  Small Business: Trouble on Main Street
Oct. 23, 1957  Aid to Small Business
Aug. 24, 1955  Future of Small Business
Mar. 02, 1950  Financial Aid for Small Business
Mar. 21, 1945  Revival of Small Business
Mar. 04, 1942  Small Business and the War
Jul. 01, 1939  Government Loans to Small Business
Apr. 03, 1934  Small Business Under the N.R.A.
Financial Institutions
Small Business