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Over the last 10 or 15 years we’ve watched the decline of community banks as they’ve either been consumed by bigger financial institutions or simply disappeared. The fallout from the Great Recession hasn’t helped small business lenders either. Just a couple of months ago the Federal Reserve Bank of Cleveland reported that although credit has eased for their larger siblings, credit is still tight for the smallest small businesses. Granted, the smallest small business carry a higher risk potential than do bigger small businesses, mid-sized businesses, and large businesses, but I can’t help but wonder if we’re being short-sighted in terms of economic growth by starving these businesses for funds.
Former SBA Administrator Karen Mills suggests two out of every three net new jobs are created in this space and with 1.3 million people losing unemployment benefits this month and another 3.6 million likely to do so before the end of the year, I wonder if it’s time to seriously invest in the smallest small businesses. Senator Reid suggests he’d support a temporary extension of unemployment benefits at a cost of roughly $25 billion (yes that’s billion with a “b”), which makes me wonder why the SBA, which is likely where any government action regarding small business lending would take place, has been stuck at right around the $30 million mark for the last few years.
Maybe small business would be a good place to invest some of that $24 billion?
I know there are challenges associated with lending to these smallest small business and a lot of reasons why traditional lenders aren’t excited to get on that bandwagon. Let’s dive into just a couple:
The challenges facing small business and small business lending are complicated and have no easy answers. That being said, I’m convinced we need to look at those challenges from a different paradigm. I don’t think there’s too much disagreement that what we’re doing now isn’t working. Small businesses, and particularly the smallest small businesses, are where the lion’s share of jobs are created in this country. It seems like a very smart investment to me.
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Small business evangelist and veteran of over 30 years in the trenches of Main Street business, Ty makes small business financing and trends accessible in common sense language devoid of the jargon.
Blog
7 min read • Aug 17, 2022