SBA in­volves credit unions for small biz lend­ing

PCQuest - - SMB CORNER -

The fi­nan­cial ser­vices mar­ket has pro­gressed by leaps and bounds in terms of in­no­va­tion, from the rise of al­ter­na­tive fi­nance to the de­vel­op­ment of tech­nolo­gies like blockchain and open bank­ing ini­tia­tives. The global fi­nan­cial cri­sis in 2008 was, in many ways, a cat­a­lyst to this in­no­va­tion, es­pe­cially in the area of small busi­ness (SMB) fi­nance, as banks pulled their ser­vices away from SMBs and Fin­Techs stepped in to of­fer an­other op­tion.

Now, a decade on, small busi­ness op­ti­mism is up in the U.S., de­spite a flurry of con­cerns over reg­u­la­tions, eco­nomic de­vel­op­ment and more.

About a third of SMBs re­cently told Cap­i­tal One they’re cur­rently in a bet­ter fi­nan­cial po­si­tion than they were a year ago, for in­stance. Mean­while, 71 per­cent of SMBs told Wells Fargo and Gallup that their fi­nan­cial sit­u­a­tion is at least some­what good.

But a new re­port from the U.S. Small Busi­ness Ad­min­is­tra­tion (SBA) may call into ques­tion whether the re­bound in SMB op­ti­mism is linked to a re­bound in ac­cess to fi­nance. In fact, ac­cord­ing to the SBA’s lat­est re­port, cor­po­rate fi­nance has largely bounced back in the na­tion — but small busi­nesses aren’t see­ing much of that re­cov­ery.

“There’s been a big re­bound in lend­ing to big busi­nesses, but there’s been a very small re­cov­ery in lend­ing to small busi­nesses,” said Rebel Cole, Ph.D., au­thor of the re­port and Florida At­lantic Uni­ver­sity’s Kaye Fam­ily En­dowed Pro­fes­sor in Fi­nance. “The reper­cus­sions of this are huge. Small busi­nesses ac­count for about half of all pri­vate sec­tor em­ploy­ment, about half of all net job growth and about half of gross do­mes­tic prod­uct.”

“If small busi­nesses can’t get credit, they can’t grow,” he con­tin­ued. “They can’t hire peo­ple; they can’t in­vest in new plant equip­ment, so the econ­omy can’t grow. That’s one big rea­son we’ve had such an ane­mic re­cov­ery since the fi­nan­cial cri­sis, is the small busi­ness sec­tor has been con­strained.”

In its re­port, the SBA out­lines sev­eral rec­om­men­da­tions for pol­i­cy­mak­ers to en­cour­age an ex­pan­sion of small busi­ness lend­ing among the tra­di­tional fi­nan­cial ser­vices in­dus­try. They in­clude the cre­ation of new com­mu­nity banks, the re­duc­tion of reg­u­la­tory con­straints on small banks and the sup­port of tra­di­tional non-banks.

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