Evening star., 1939-04-05
5. E. {. Investigation
OF Business Credit
Needs Starts Talk
Flow Of Argument Seen
As to Just What Has
Curbed Capital Flow
BY SMITH REAVIS,
Associated Press Financial Writer,

NEW YORK, April 5.-The plan
of the Securities and Exchange Com
mission to investigate the credit
needs of small business" throughout
the country may be expected, some
Wall Streeters think, to bring out
lot of argument as to what has
been slowing down the flow Of capi-
tai into productive enterprise of re-
cent years.
Total assets of small business" !"
defined by member of the commits
sion as made up of companies of re-
sources of $5,000,000 or less. it was
pointed out. accounted, in 1885, for
more than IS per cent of the assets
of all corporations reporting to the
Internal Revenue Bureau. Busi-
nesses of $1,000000 or less made up
13 per cent of the total.
Thus small business is an impor-
tant part of our production picture.
Does it want partnership capital, as
represented by common stock; long
or medium term debt capital, such
as bonds, or merely commercial
credits from banks. which have
heavy supply of such money on hand
these DAYS?
There has been much difference OF
opinion on this point, which has been
made specific element in the pro-
posed S. E. c. research.
Partnership Money or Credit?
In some administration quarters,
plans have been advanced for in
/ termediate credit banks to supply
small business with working capital.
But also, within the administration.
are those who say it is partnership
money that is wanted and that this
is harder for a small company to get
than bank credit for limited period.
Partnership capital involves no fixed
/ charges such as debt or interest
charges. but it does involve the ele-
ment of risk which cautious investors
! these days are indisposed to take.
I A study of the flotation of stock
| and securities issues of around
! S1,00 900 or so, the S. E. c. found,
| disclosed that costs involved came
to about 20 per cent of the money
to be raised. The largest portion
of that cost was in distribution of
| the securities, which must be sold to
/ the investor with more SaleSmanShip
than the stocks Of seasoned large
corporations with a good record of
dividend payments.
Commercial and investment bank
ers were more or less absolved
by Commissioner jerome N. Frank
Of any responsibility for the failure
of money to get into small business
at the rate it should.
/ The commission" he said. doesn't
/ assume that any one is to blame.
1t would seem that commercial
| banks are not theoretically in a
position to supply long-term cap
ltal. Nor are investment bankers
| to blame
Public Caution Blamed.
Some underwriters with expert
ence in raising funds for small cor
porations through the sale of COM
mon stocks assert that the trouble
is with the investing public. which
wants more definite signs of busi-
ness revival than have so far ap-
peared before it will go partners.
Many of them blame higher taxes
and labor costs and regulation" of
business for the hesitancy of the
WOuld-be Stockholder.
At any rate. the findings of the
S. E. C. and of the United States
Junior Chamber of Commerce. which
is joining that body in its extensive
investigation, will be placed before
the temporary National Economic
Committee which may recommend
! legislation, if legislation is necessary.