Access to Capital: Is it the Real Problem?

February 3, 2012 at 11:00 am 2 comments

There has been much discussion during these turbulent economic times regarding the lack of access to capital for small businesses. This is especially true for small businesses in underserved communities.

The U. S. Chamber of Commerce stated in a 2010 report, Small Business Access to Capital: Critical for Economic Recovery, that “small firms represent 64 % of net new jobs created over the past fifteen years.” This reinforces the point that providing capital is necessary to sustain small businesses.

While it is without dispute that small businesses are central to the recovery of our economy and traditional lending sources have in the midst of this economic downturn increased lending standards, capital is still available for small businesses. I want to suggest that the problem is not really lack of access to capital but not knowing where capital is available to support small business lending.  Many small businesses look only to traditional lending sources, perhaps never being told about non-traditional lenders such as Community Development Financial Institutions (CDFIs).  There are over 900 across the country and 20 in North Carolina.  For many years,  they have  been successful and productive lenders to small businesses across the state.

The Chamber’s report suggests that any strategy to jump start the economy must have a robust small business development component.  Why, then, is there such little debate around making capital accessible to small businesses?  Not only should this be central to policy development in all segments of government, but also in the lending policies of banks as well.  Instead, banks complain that their purse strings are being tied by bank regulators. Rather than playing the blame game, there should be a cooperative push by the public and private sectors to make sure there is a strong flow of capital to our small businesses in order to help with our economic recovery.  I applaud the CDFI Fund for doing its part to get capital into the hands of those who need it most—since 1996, $69 million in CDFI funding has been awarded to CDFIs in North Carolina alone.  

Success, however, requires a flow of information from all lending sources down to small businesses. If this flow improves, then the flow of capital to small businesses would improve. Let’s allow small businesses to become the driving force for bringing all sectors of our economy back to a place of thriving. Help spread the word about alternative access to capital.

For more about the CDFI fund see http://www.cdfifund.gov/.

 – by Lenwood V. Long, Sr., President/CEO

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Entry filed under: CDFI, Small Business. Tags: , , .

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