Small Business Access to Capital: What’s the Problem?

By Karen Axelton

In late June the House Committee on Small Business held a hearing to explore the state of small business financing. The Policy Dialogue on Entrepreneurship blog reported on the hearing:

Delivering a summary of his report on the State of Small Business Access to Capital, Treasury Secretary Timothy Geithner noted that lots of small businesses were concentrated in areas related to real estate and construction—the industries hardest hit by the financial crisis.

Geithner reiterated how the Small Business Jobs Act of 2010 aimed to provide small business with more access to capital through:

• modifications to the SBA Capital Access Programs
• a State Small Business Credit Initiative
• creation of the Small Business Lending Fund (SBLF)

The two latter initiatives were aimed at improving the amount of capital available to community banks and encouraging them to lend to small business. However, much of the hearing focused on why these efforts don’t seem to have led to results and why small businesses are still struggling to get capital they need. The Committee chair, in particular, noted that there’s a gap between banks having plenty of money to lend, but small businesses saying that they still can’t get money from banks.

Responding to the questions, Secretary Geithner said that the Obama Administration is undertaking a five-point strategic plan to help small businesses expand and invest:

1. Providing significant tax relief targeted to small businesses
2. Helping small businesses obtain access to working capital on more favorable terms
3. Regulatory reform, which includes a government-wide review to address regulations that hinder small businesses
4. Increasing federal contracting options for small businesses and improving their access to procurement opportunities
5. Programs to help small businesses access foreign markets and compete overseas

Will these efforts help? It remains to be seen.

Image by Flickr user Cliff 1066 (Creative Commons)

This entry was posted on Thursday, July 7th, 2011 at 6:00 am and is filed under Capital Access, Raising Capital, Small Business, small business. You can follow any responses to this entry through the RSS 2.0 feed.


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