Small companies shed another 25,000 jobs

Small companies shed another 25,000 jobs


NEW YORK (CNNMoney.com) -- Small companies shed another 25,000 jobs in December, marking the 23rd consecutive month of cuts, according to a report released Wednesday by payroll-processing firm Automatic Data Processing.

The silver lining is that December's pink slip count was the lowest since July 2008 for small firms, those with 50 or fewer workers. In one sector, the job pool actually grew: Service-oriented small businesses hired a net 11,000 workers in December.


Three of 4D Equipment & Services' founders -- Alicia Lingenfelser, Stephanie Colovas and Dena Bartnicki -- went to Washington to describe their lending plight. Not pictured is Helen Chandler, the company's fourth partner.
"If recent trends continue, private employment will begin rising within the next few months," said Joel Prakken, chairman of Macroeconomic Advisers, in a written statement. ADP's (ADP, Fortune 500) monthly data is seasonally adjusted, meaning that the pop in hiring at small services businesses was not limited to extra Santa Clauses.

Still, the nation's smallest companies cut 1.8 million jobs last year -- almost 40% of the 4.7 million positions lost, by ADP's estimates. In a speech days after the jobs forum he convened at the White House last month, President Obama emphasized the key role small companies play in spurring economic recovery.

"Our work is far from done," Obama said. "Even though we've reduced the deluge of job losses to a relative trickle, we are not yet creating jobs at a pace to help all those families who've been swept up in the flood."

There are hurdles making it hard for even the most ambitious small business owners to start hiring again. Alicia Lingenfelser co-owns a Dallas construction business with three partners. They want to expand, a move they estimate would create work for more than 100 people. But they're struggling to find a bank willing to gamble on lending them the money.

The obstacles: Lingenfelser was a witness at a Senate hearing last month on the grim lending conditions facing small businesses. She and her partners own 4D Equipment & Services LLC, a concrete truck leasing firm. They want to expand the business to include a gravel and sand supply pit.

"If funded, work would begin immediately, and the mine could be opened in six months," Lingenfelser told the Senate committee. An estimated 104 workers would be needed for the construction -- electricians, welders, plumbers, heavy-equipment operators, factory technicians, and manufacturers. Afterward, the new plant would require a full-time staff of at least 14 new employees, Lingenfelser said.

The four entrepreneurs, all women, need $3.3 million in financing. Chase (JPM, Fortune 500) provided the startup loan that initially launched 4D, in 2006, but this time around, the bank refused to even meet with the partners. Another lender, Frost Bank of Texas, killed their application early because it views the entire construction industry as too risky to finance right now.

Two banks -- Wells Fargo (WFC, Fortune 500) and BBVA Compass Bank -- are still in talks with 4D's owners. As of this week, however, 4D still had not obtained the financing it needs.

Lingenfelser wants Washington's policymakers to stop brainstorming about solutions and start taking action.

In October, President Obama proposed lifting the current cap on the size of loans that can be backed by the Small Business Administration, which currently stands at $2 million. Lifting that cap to $5 million, as Obama and several members of Congress have suggested, would help 4D with its expansion.

"Both Compass and Wells Fargo seem very interested in working with us and helping us, but we all know that cap is a problem for us," said Dena Bartnicki, another of 4D's founders. The proposal to raise the SBA loan limits is currently stalled in Congress.

Co-owner Lingenfelser said that she knows the problem is not limited to just her and her firm.

"We keep hearing from Congress and the President, we have to get small business back in line, back to work. You keep hearing it, but what you don't see is that you don't see them doing anything about it -- yet," she said. "It is not enough to sit back in a chair and say 'here is a problem.' You have to do something about the problem."

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