Washington, D.C. – The Bipartisan Policy Center has launched a new task force to examine the challenges facing small businesses and entrepreneurs in obtaining financing to start and grow their enterprises, which are key to innovation and jobs in the U.S. economy. In 2018, the task force will release a series of recommendations to bolster small business access to credit and other financial services while maintaining the stability of our financial system.
Small businesses are responsible for 50 percent of all private sector jobs in the U.S. economy. They form the backbone of communities and are a key source of innovation. Access to capital is critical for startups, but a worrisome long-term trend shows a decline in new business formation.
BPC’s new Task Force on Main Street Finance is led by co-chairs who have worked in the public and private sectors – former Small Business Administration Administrator Karen Mills, former senator from Maine and Senate Small Business Committee Chair Olympia Snowe, former FirstMerit CEO Paul Greig, and BPC board member and entrepreneur/angel investor Mark Walsh.
Task force members have conducted preliminary fact-finding visits to local communities to explore the financing hurdles facing small businesses.
“We are finding that small businesses and entrepreneurs, especially those located outside major urban areas, as well as women-owned and minority-owned enterprises, face challenges in obtaining affordable financing,” Snowe said.
We are finding that small businesses and entrepreneurs, especially those located outside major urban areas, as well as women-owned and minority-owned enterprises, face challenges in obtaining affordable financing.
“The availability of private capital and access to affordable financing are important components of a healthy and dynamic economy that promotes entrepreneurship, expansion, and formation of new small businesses,” Greig said.
In its first paper, the task force outlined the issues and questions it will focus on. Main Street Finance: How Can the Financial System Better Serve Entrepreneurs and Small Businesses? identified several worrisome trends, including:
- Long-term consolidation of community banks, which has left many communities without a local small business lender
- Decline in loans smaller than $250,000 by community banks, due to their inherent cost structure and increased regulatory burdens
- Decline in relationship lending, potentially reducing credit for credit-worthy borrowers
- Federal regulatory system not well designed to support new innovations while protecting borrowers
“Small businesses and entrepreneurs are an engine of growth for our economy. They create jobs and a future for American workers. We need financial systems and technology platforms that help make capital available at competitive terms so these enterprises can thrive,” Walsh said.
“Small business lending has seen significant transition and disruption in the years since the Great Recession,” Mills said. “In particular, a decline in the availability of small dollar loans – the size of loans most needed by small businesses – has resulted in a persistent capital gap for small firms. Now, with the rapid growth of fintech lenders increasing financing opportunities to small business, we may have a chance to solve this gap, but it will require smart regulatory reform that protects small businesses without stifling critical innovation.”
KEYWORDS: TASK FORCE ON MAIN STREET FINANCE