Main Street Wednesday — NSBA Urges Congress to Increase Small Biz Access to Capital

March 18, 2015

By Bob Coleman
Editor, Main Street Wedensday

Including raising SBA loan authorization levels.

The National Small Business Association says the credit crunch is real, and continues to negatively impact Main Street.

The Problem?

Small-business owners face unique challenges when trying to obtain financing. Start-up and expanding small businesses frequently do not have the assets necessary for a traditional bank loan,and smaller loans generally are less-profitable for banks.

Ongoing bank consolidation and failure has led to fewer community banks and fewer character-based loans which has limited small businesses in getting financing.

Nearly one-third (28 percent) of small-business owners, according to NSBA’s 2014 MidYear Economic Report are unable to obtain adequate financing.

Small-business loans have been declining: in 1995, small loans represented 40 percent of bank loan dollars but today it’s only 23 percent.

According to the Federal Deposit Insurance Corporation (FDIC), small business lending is still below pre-recession levels: as of March 2014 small business loans are at $585 billion, as compared to $711.5 billion in June 2008, showing a decline of 18 percent.

Despite banks’ claims that they are lending to smaller firms, lending standards remain persistently tight: in its October 2014 quarterly Senior Loan Officer Opinion Survey, the Federal Reserve reported that only 8.2 percent of banks eased credit conditions “somewhat” for smaller firms, while14.5 percent eased conditions for larger firms – an ongoing pattern where smaller loans are more highly scrutinized.

The Solutions?:

NSBA urges Congress to protect and support the U.S. Small Business Administration’s (SBA) critical loan programs as well as increase credit unions’ small-business lending cap and finally open up crowdfunding options to small firms.

In FY 2014, SBA approved 52,044 7(a) loans for $19.19 billion – a 12 percent increase in the number of loans and a 7.4 percent increase in dollar amount. There also was a 23 percent increase in the number of loans under $150,000.

The zeroed-out fees for certain SBA loans has contributed to SBA loan growth and should continue until small firms can more easily access affordable capital. Additionally, NSBA supports an increased authorization level for SBA loans in order to prevent unnecessary stalls in lending. NSBA also supports efforts to streamline and simplify the SBA loan process.

The nation’s credit unions are currently limited to a cap on business loans of 12.25 percent of their assets, yet they are willing, and able to increase their lending to small firms but need Congressional action to increase the cap.

The Securities and Exchange Commission continues to drag its feet on implementing the NSBA-supported provisions within the Jumpstart Our Business Startups (JOBS) Act of 2012 to make crowdfunding a viable option for small firms. The administration and Congress need to step in and require SEC action

Check out the other 9 priorities of NSBA for the 114 Congress