Page 160 - Introduction to Business

134 PART 1 The Nature of Contemporary Business

reality Do you know of a new small business in your area that recently
CH ECK opened? Why is this new business needed or why isn’t it?

Government Support of Small Business

LEARNING OBJECTIVE 2
Discuss the ways government can support small business enterprises.

Government can play an important role in fostering and supporting small business
creation and development by providing an environment in which entrepreneur-
ship can flourish. Some of the ways government can assist small business firms are
• Reduction of burdensome regulations
• Simplification of tax rules
• Improved access to financial resources
3
For example, the U.S. Small Business Administration is a federal agency that
provides loan guarantees to banks making loans to small business firms. Since the
loans are guaranteed by the government, if the small business does not pay back
the loan, the bank can obtain its loaned funds from the government. With lower risk
in making such loans, banks make more loans to small businesses and make loans
at lower interest rates than if no guarantees were available. Small businesses bene-
fit from the increased access to needed financing, banks gain from new customers
that will hopefully grow over time and form long-term credit relationships, and the
government serves society by sowing the seeds of future economic development in
communities across the country.
Another way in which government can support small business entrepreneurs is
by providing essential information. In the United States the following websites are
designed by the federal government to help small businesses get the information
they need to succeed:
• www.sba.gov/advo The Small Business Administration (SBA) Office of Advo-
cacy provides one of the premier websites for small business firms. Regula-
tions and sources of private and government financing are among the types of
information that are available. The SBA was established by the government in
1976 to “counsel, assist, and protect small businesses” and works to bridge
government and private groups in supporting small business.
• www.businesslaw.gov Federal and state rules and regulations are covered
here. The SBA and Department of Commerce are working together to expand
the types of information available on this website.
• www.dol.gov/elaws The Department of Labor gives compliance assistance to
small businesses using online legal services that can help answer questions
about labor.
• www.export.gov The Department of Commerce helps small businesses export
their products to foreign countries on this website.
The importance of public policy in the growth of small business is apparent in
comparing the United States and Europe. From 1960 to 1983, the number of busi-
nesses in the United States more than doubled, but did not change on average in
different countries in Europe. The economist and 1992 Nobel laureate Gary S.
Becker has argued that this difference is due to regulatory barriers and high taxa-
tion in Europe that slows business job growth. The United States has sought less
rigid labor and capital markets, freer competition, and lower industrial subsidies
than Europe. In recent years, Europe has been moving toward a public policy more
similar to that of the U.S. through the creation of the European Monetary Union

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