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Main Street Finance: How Can the Financial System Better Serve Entrepreneurs and Small Businesses?

Entrepreneurs and small businesses are a key source of job creation and economic growth. Yet many small businesses and entrepreneurs face challenges accessing affordable financing, especially loans that are less than $250,000. This paper will explore these challenges, highlight recent trends in small-business financing, and present issues for further exploration.

Many small businesses and entrepreneurs face challenges accessing affordable financing. This paper explores these challenges, highlights recent trends in small-business financing, and presents issues for further exploration.

The Bipartisan Policy Center launched the Task Force on Main Street Finance to address the challenge of affordable financing for small businesses and entrepreneurs. The task force has spoken with small businesses, financial firms, regulators, and other experts, and believe the time to act is now. The recent surge in financial-technology, “fintech,” companies is disrupting small-business lending and requires appropriate policies to nurture its development while still protecting consumers and financial stability. Policymakers are currently reviewing post-crisis financial reforms, and it is important that any review focuses on how the financial system can better serve entrepreneurs and small businesses to help grow the U.S. economy and create jobs.

Next year, the task force will make specific recommendations to improve access to affordable financing for all qualified small businesses and entrepreneurs, regardless of gender, race, geographic location, or size of the business. This means evaluating the role of traditional sources of financing, including the Small Business Administration, as well as the potential for emerging fintech companies to meet the financing needs of small businesses and entrepreneurs. The task force will look at the impact of existing laws and regulations on access to affordable financing and will distinguish between different types of small businesses, from high-growth firms to Main Street firms. In each case, the task force will make recommendations to improve financing to help reverse the long-term decline in small-business formation and to foster more economic growth and job creation.

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