“Let’s do more to help the entrepreneurs and small-business owners who create most new jobs in America,” President Obama said in the first few minutes of his State of the Union address. “Over the past five years, my administration has made more loans to small-business owners than any other [administration].”
Although the president’s plea to promote “Made in the USA” to the rest of the world is laudable, I was surprised there was no further mention of the access to capital crisis faced by the Main Street businesses that he suggested create “most new jobs in America.” Particularly in light of the millions of Americans still on the unemployment rolls.
Not too many weeks ago, in the midst of rumors that the Small Business Administration (SBA) was going to be buried within a consolidation that included Commerce and Labor, the president tapped Maria Contreras-Sweet, a former small-business lender from California, to take the reins with the departure last year of administrator Karen Mills. I was pleased to see the president potentially put to bed rumors of irrelevance surrounding the SBA, but I was disappointed in the passing mention of what could be a positive force in an effort to promote job growth.
Of course it’s easy to cast stones and complain. In an effort to avoid the tenor of intransigence and backbiting that is now functionally crippling Washington’s ability to accomplish anything, I’d like to toss my two cents into the conversation and share what I would have liked our president to say regarding small business, Main Street and job growth.
Although the economy created more jobs in 2013, I don’t think it’s a surprise to anyone that it wasn’t enough. There are far too many folks still on the jobless rolls and we would be well-served to talk about how we can create an environment where small-business owners are optimistic enough about the future to stick their necks out to create new jobs. Unfortunately, the tone in Washington of bickering and gridlock does just the opposite. This first step might seem like an over-simplification of the problem, but who can blame the small-business owner who keeps profits close to the vest when the uncertainty we portray in Washington is so prevalent. A reduction in vitriol would cost us nothing and would go a long way to create an atmosphere of confidence for Main Street.
We need to make it easier for Main Street business owners to go into their local community bank or credit union and walk out with a small-business loan. Doing this won’t be easy and will require all of us to think a little differently about credit, community banking, and how we stimulate local economies. Part of this shift in paradigm will require us to potentially relax some of the federal regulations we require of community bankers and how they apply to small-business owners. As long as it costs about the same to offer a $500,000 loan to what you and I would consider a large small business as it does a $15,000 or $20,000 loan to a locally grown Main Street merchant, the smallest small businesses will continue to struggle for capital to fuel grow. In October of last year, the SBA eliminated fees on loans of $150,000 or less, which was a good start. I challenge our new SBA Administrator Maria-Contreras Sweet to explore additional ways to encourage participating SBA lenders to accommodate the needs of the smallest small businesses so they can grow, create jobs and strengthen local communities.
We need to do a better job of helping small-business owners qualify for financing. It’s far too easy for a banker to say, “It’s not my job to fix the credit of a small-business owner that doesn’t qualify for a loan.” This is a shortsighted approach to small-business lending. There has long been an informal partnership between community bankers and Main Street merchants — think it’s time we encouraged small-business lenders to take a longer view of borrowers and their potential by incentivizing bankers to work with borrowers who might not qualify today and help them better meet lending criteria down the road.
I challenge small-business owners to take more responsibility for their credit status and better prepare their businesses for growth. There are already numerous resources available for small-business owners with a hunger to learn how to more effectively run their businesses. Don’t let your creditworthiness, or lack of same, handicap your ability to grow.
I realize the challenges that face small business aren’t simple to solve. I also realize that it’s really markets and not politicians that determine which businesses survive and which don’t, but right now the deck is stacked against the very businesses that create the most jobs and enable local communities to thrive. The costs of kicking this can down the road are incalculable.
I think it’s time the politicians in Washington stopped talking about how important small business is to our economy and started doing something to support small business. My suggestions are only a start — what would you add to the list?
A Main Street business evangelist and marketing veteran with 25 years in the trenches, Ty Kiisel writes about small-business finance issues for lendio.com and is author of the book, "Getting a Business Loan: Financing Your Main Street Business."