At last week’s annual Small Business Administration’s conference for National Small Business Week, SBA Chief Karen Mills took some questions. One small business owner said that she received “invaluable support” from one of the SBA’s Small Business Development Centers, which operate in every state.
The lack of credit from banks was a complaint of two small business owners. The Federal Deposit Insurance Group reports that loan balances to small businesses fell in the first quarter of this year (while loans to big businesses increased). But it’s even worse for small businesses in other countries. Headlines say that small business lending from Spain’s crumbling banks is drying up and in England 50 small businesses are failing daily due to lack of lending.
Bank resistance to small business loans and credit has forced countries to look at alternative avenues for access to capital. China will start allowing small businesses to sell bonds. Here in the U.S., Congress passed legislation to allow small businesses to seek small private sector investments through crowdfunding.
We don’t know how successful these new alternatives to traditional financial institution lending will be for small businesses. Crowdfunding is a novel and not understood concept for most small businesses. So the results of a recent national poll finding that 45% of small business owners not knowing if crowdfunding would be helpful and 53% not thinking it would is no surprise.
However, a few other results of this poll show why crowdfunding and other access to credit avenues for small businesses are important. Small business owners are still getting most of their lending from a combination of family and friends (71%), personal credit cards (62%) and business credit cards (59%).
With small businesses creating at least half of the net new jobs in this country, we shouldn’t be letting the vital growth of these real job creators up to the whims of family, friends, and credit card companies. We need crowdfunding and other alternatives sources of capital if banks won’t or can’t do the job.
Frank Knapp, Jr. is President & CEO of the South Carolina Small Business Chamber of Commerce. Cross-posted at www.unconflictedsc.com.