Because sources of business capital are so interconnected, over-regulating any one type of financing such as private equity or venture capital would have the unintended consequence of limiting financing for small businesses and consumers, according to a new U.S. Chamber report.

“When small businesses do succeed and create employment and growth, an important factor in their success is access to the financing needed to support growth,” says David Hirschmann, head of the Chamber’s Center for Capital Markets Competitiveness (CCMC). “Indeed, given the interdependence between banks, markets, and among the different components of the market, if one financing source were to disappear, it would have potentially devastating consequences for other parts of the financial system.”

This interconnectedness is also one of the main reasons why regulatory intervention in one part of the financial system so often generates unpredictable and undesirable consequences in some other part of the financial system, Hirschmann notes.

Small businesses are already seeing the effects of increased regulation under the Dodd-Frank financial regulatory reform law. The new law effectively expanded the legal liability on credit rating agencies for “rating misrepresentation.” The three major U.S. credit rating agencies responded by asking debt issuers to not use their ratings. However, by SEC regulation, these debt issues needed ratings, so the market for these issues essentially froze for a few months. Scores of debt issuers were denied access to much needed funds.

The CCMC report, Sources of Capital and Economic Growth: Interconnected and Diverse Markets Driving U.S. Competitiveness, outlines the various the various types of financing sources available to individuals and businesses, including banks and financing companies; personal credit such as credit cards and home equity loans; and equity and debt financing. The report finds that the better the financial system functions, the greater the number of new companies launched, the better the overall management of risk, and the greater the availability of consumer credit.

The report was released two days before CCMC’s fifth annual Capital Markets Summit, which features speeches by Elizabeth Warren, assistant to the president and special advisor to the Secretary of the Treasury; Jamie Dimon, chairman and CEO of JPMorgan Chase & Co; Douglas R. Oberhelman, chairman and CEO, Caterpillar, Inc., and Rep. Spencer Bachus (R-Ala.), the chair of the House Financial Services Committee.