Forum Seeks Solutions To Thaw Frozen Small Business Credit

In October, President Obama called for a finance summit to bring bankers and small businesses to the table and help get credit flowing to small businesses again. The forum took place on November 18.

As the U.S. economy emerges from the crevasse that most nations have slipped into during the past few years, two things are very clear: small businesses and financing have both fallen on hard times and both will be instrumental in the economy’s march forward.
The Small Business Administration
and the Office of Advocacy are both tuned into these related issues: the SBA as an important source of loan guarantees, and the Office of Advocacy as a key source of research and analysis on small business lending.
Jump-starting small business borrowing and commercial lending was the focus of a forum sponsored by the SBA and the U.S. Department of the Treasury in November. President Obama called for this summit during meetings with small business owners in October, as part of the effort to get credit flowing to them again. Small business owners from many regions of the country were in attendance and were able to discuss the current environment and the credit challenges they face. Small and large lenders, industry associations, and community development financial institutions also took part. Representing the Office of Advocacy were Acting Chief Counsel Susan Walthall and Economist Brian Headd.
Treasury Secretary Timothy Geithner discussed the government’s
policies that have stabilized the financial system, and he urged banks to lend to qualified businesses. SBA Administrator Karen Mills stressed that SBA financing has filled some of the gap during thiscredit crunch for small businesses. SBA has become a bigger and more important supplier of credit in the small business market, particularly with its new targeted programs reducing loan fees and increasing loan guarantees. And Treasury’s Coalition of Community Development
Financial Institutions has helped businesses in overlooked rural and urban markets, even before the economic downturn. Small business owners discussed financing issues in recent times. Their myriad of financing adventures illustrated a couple of things: financial self-reliance is back in vogue as banks have all but shuttered their lending windows; and relationship lending, while valuable, is not a panacea, as even banks worry about their bottom lines. Additionally, policymakers and analysts were reminded that behind the dismal aggregate statistics circulating in Washington are actual business owners, employees, and communities. Bankers defended their restrictive lending practices: while they try not to let their customers fail, especially with years of a relationship at stake, they are businesses too, and are required to make financially prudent decisions.
Small business owners and representatives from the lending community
urged Congress to continue funding to extend SBA’s 90 percent guarantee and the reduction of fees on SBA 7(a) and 504 loans. They all agreed that this will be a crucial step in the continued recovery of small businesses.
Congress was well represented, with Senate Small Business Committee
Chair Mary Landrieu and House Small Business Committee Chair Nydia Velazquez in attendance, along with Senators Sherrod Brown (Ohio) and Mark Warner (Virginia). They added to the discussion, and stressed related problems such as lending in manufacturing sectors and distressed areas. In fact, Senator Warner mentioned that while healthcare dominates the news, increasing financing and jobs should be our current focus. While mentioning that small business financing problems are not behind us, he detailed a government proposal to increase small business lending. Agriculture Secretary Thomas Vilsack also attended, and he discussed his agency’s prominent role as a lender to small agriculture businesses.
Measures to help alleviate the credit crunch were offered: additional
expansion and streamlining of SBA programs; letting small businesses tap into the Troubled Asset Relief Program (TARP); reducing the stigma that has accompanied banks’ use of TARP funds; and spreading government financing
assistance more broadly. (That is, instead of just increasing financing
assistance, increase support for businesses in distressed areas and increase counseling for small businesses.) But the overwhelming sentiment of the conference was that the bruising that small business balance sheets have taken is now healing, and banks need to recognize this. Secretary Geithner had a pointed comment to banks with regard to solutions. He stressed that banks should not wait for government help, but should do what they can to regain the trust of the public.
An analogy that several speakers returned to was the time-worn picture of getting the elementary girls in one corner and boys in the other corner together to dance, or getting good bank and small business matches for lending. One could not help but feel that the two groups were at least meeting on the dance floor for a handshake, as small businesses and banks got a better understanding of each others’ positions. For the sake of the unemployed and our economy overall, let’s hope the dancing begins soon.