Room to Grow: Economic Trouble for Small Businesses

With banks in lockdown mode, small businesses with big potential are being stifled. Why Main Street innovators matter to us all.

By Jeff Garigliano

From Reader's Digest

Images from this article

Photographed by Adam Taylor

Deborah Moore is mentoring her daughter, Mackenzie Milcarek, in small-business innovation as she tries to grow her medical-transcription company.

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Photographed by Tim Tadder

Lana Antonova's Web-design firm has done well. But she needs $25,000 to grow. So far, she hasn't found it.

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Photographed by Kevin J. Miyazki

Scott McIntosh has a licensing deal for his cordless band saw and an eager customer base. All he needs is a loan.

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Photographed by Adam Taylor

Deborah Moore is mentoring her daughter, Mackenzie Milcarek, in small-business innovation as she tries to grow her medical-transcription company.

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If you want to understand what's wrong with the economy, consider Deborah Moore. After working as a nurse-practitioner for 15 years, Moore launched a medical transcription company from her home seven years ago, mostly to be closer to her two kids. The company, called AccuStat EMR, has grown dramatically: Moore still handles transcription services, but she also helps hospitals transfer their records from paper files to electronic documents. Since the federal government wants most hospital records to be stored electronically by 2014, it's a booming business. Moore has big clients, like the University of North Carolina Student Health Center, Beth Israel Hospital in Boston, and the Missouri Department of Corrections, and her revenue in 2008 was $35 million. Her only problem? She can't get a loan.

Like most small businesses, AccuStat EMR needs credit to grow. Not much -- about $500,000, which Moore would use to buy computers in bulk. (Right now, when her clients need upgraded computers to store their records, she stands in line at Best Buy.) She has contracts lined up with Dell and HP but no cash to pay them.

Moore has tried both local and national banks, independent investors, and venture capitalists, all with no luck. Some banks didn't understand her business, and a few didn't give her a reason for their rejection, but many blamed her personal credit-fallout from a divorce eight years ago -- even though her company's financials were sound. Moore was named the Small Business Administration's person of the year in South Carolina for 2008 (and second runner-up nationwide) but couldn't even get a government-guaranteed SBA loan. "There's nowhere to go," Moore says. "As soon as you say, 'I'd like to borrow some money,' the door closes in your face."

Small businesses created more than 60 percent of all new jobs in the past decade; today, about half of all private-sector jobs in the United States are at small companies like Moore's. They generate more medical and technological patents per employee than big corporations, and history shows that they're the first to begin hiring at the end of a recession. In short, small business has long fueled our country's growth and expansion. But that's the insidious trap of the current credit crunch -- it's threatening to squelch American innovation, which could hold the key to our recovery.

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