For small businesses and entrepreneurs, having access to affordable capital can mean the difference between success and failure. Recent nationwide polling conducted by ASBC found that nearly half of small business owners continue to face barriers to affordable capital. Public officials should make forward-thinking improvements to existing capital access programs and develop common-sense rules that will foster innovative collaboration between small businesses and trustworthy lenders.
Among the choices for policymakers to consider is enabling responsible innovation. For example, acceptance and effective regulation of alternative lending sources and strategies, such as crowdfunding, would help. Fostering competition between commercial banks and community banks, cooperatives and credit unions is another pathway to innovation. At the federal level, small and micro-businesses would benefit from increased funding for existing SBA and CDFI funding channels. Providing more capital to microenterprises would help to create jobs, while stabilizing local economies. And to bring more stability, policymakers could fundamentally address the risk of too-big-to-fail banks taking on too much credit, which still threatens the entire banking system.
Boosting the supply of available small business loans will spark competition between lenders, ultimately leading to more favorable loan terms across the board. Making affordable credit more easily accessible will boost demand for such loans, allowing more entrepreneurs to expand operations. Additionally, a clear-eyed assessment of the lending barriers faced by entrepreneurs in underserved communities can help ensure that economic growth is shared across the diverse spectrum of current and would-be business owners.