NEW COMPANIES WILL be crucial to the strength of any economic recovery. Businesses in their first 90 days of life accounted for 14% of hiring in the U.S. between 1993 and 2008, according to the Bureau of Labor Statistics.

But this recession is taking a particularly heavy toll on business creation, as sources of small-business funding dry up and would-be entrepreneurs become more risk-averse. When entrepreneurs do launch businesses, they are hiring fewer employees on average. The trends threaten to damp growth in jobs and economic output for years.

Company formation typically dips slightly in recessions, says Brian Headd, a Small Business Administration economist. Earlier this decade, business starts — including new businesses and units of existing businesses — fell 9% between the third quarter of 2000 and the first quarter of 2003, the BLS says.

This time, the decline has been steeper. Business starts fell 14% from the third quarter of 2007 to the third quarter of 2008; the 187,000 businesses launched in that quarter were the fewest in a quarter since 1995. The number ticked up slightly in the fourth quarter, the latest data available. But those new establishments created only 794,000 jobs, the fewest since the government began tracking the data in 1993.

The recession may have ended, but history suggests business creation won't rebound quickly. The 2001 recession officially ended in November of that year. But business starts didn't begin growing again until mid-2003. A sustained lull in company formation "could have huge implications for the economy down the road," Mr. Headd says.

To be sure, as in past recessions, some laid-off workers are starting businesses to stay afloat, or testing long-held dreams. The Kauffman Foundation, a nonprofit research group that promotes entrepreneurship, says more Americans started businesses last year than in 2007. Kauffman cites research by University of California, Santa Cruz, economist Robert Fairlie, who analyzes different BLS data.

But funding remains an issue. Banks are reluctant to lend, especially to companies with weak or no credit history. In a July survey of more than 53 loan officers by the Federal Reserve, more than one-third reported tightening terms for small-business loans in the prior three months, while only one reported easing terms.

The stimulus package included $730 million for the SBA to help unlock the market for small-business loans, including loans for start-ups. The agency says lending through its programs is rebounding, but some small-business owners and entrepreneurs say more government support is needed.

Investors are also conservative. Venture-capital investment in U.S. companies fell 44% in the first half of 2009 from a year earlier, to $9.27 billion. Other major sources of small-business funding — personal savings and home equity — also have declined.

"For entrepreneurial success, access to capital is the most important factor," says Mr. Fairlie, noting the recession's roots in the finance sector.

Consider Silicon Valley entrepreneur Nick Labosky, who stepped down as CEO of a digital-marketing start-up in August 2008 to launch a social-networking company. He filed for a patent, rented space and began seeking venture backers. "That's where I hit a wall" — even among investors who had funded his prior start-up, he says.

Six months and $25,000 of personal savings later, he shelved the project. "I decided that the concept of 'fail early, fail cheap' applied to...this endeavor," says Mr. Labosky, who is now a marketing executive at another Silicon Valley company.

Experts wonder if the severity of the recession will discourage entrepreneurs for years. Bob Eidson, a newly minted M.B.A. from UCLA's Anderson School of Management, might provide a clue. While still in business school, Mr. Eidson started a magazine about the bourbon industry. The company, in which he remains an investor, now has a staff of three.

Following graduation, he had planned to raise money from investors and start a company to buy distressed California real estate. After months of planning, Mr. Eidson decided funding would be too difficult and joined an existing real-estate firm. Established companies provide a "nice safety net," he says. "Money was clearly easier to raise several years ago."

Howard Anderson, founder of the Yankee Group, a technology-research and consulting firm, thinks the recession could affect a generation — or more — of would-be entrepreneurs.

Mr. Anderson, who teaches entrepreneurship at MIT's Sloan School of Management, says his father's experiences in the Depression influenced him when he started Yankee Group in 1970. Mr. Anderson didn't borrow money or seek venture investors, and he tried to always keep a year's worth of revenue in the bank. "Probably I could have grown faster taking more risk, but that risk was not in my DNA," he says.

Now, he sees students opting to take jobs with established companies rather than launching their own. In prior downturns, he says, there were a few bright spots in the economy to which potential entrepreneurs could gravitate. Today, "it's cut across pretty much every industry," he says.

Mr. Fairlie, the economist, says statistics suggest more businesses are being created more out of "necessity" than "opportunity." That "does not bode as well for economic growth," he says.

The number of new businesses with relatively low income potential — such as baby-sitting and house-cleaning services — grew last year. But compared with 2007, there were fewer new businesses with high income potential — like law firms, medical offices and manufacturing outfits.

Write to Cari Tuna at cari.tuna@wsj.com