Archive for May, 2012

Bank of America Study Optimistic About Small Business Lending

Bank of America executive Robb Hilson says that it’s actually not that hard to get a small business loan from a big bank. In its semi-annual report on small businesses (surveying 1,000 businesses with revenue of $100,000 to $5 million and less than 100 employees), Bank of America found that 78 percent of business owners who applied for loans were approved in the last two years. But, he says, many business owners are not taking advantage of their lines of credit, with a majority saving it for use only in emergencies.

This is interesting, given that other surveys have found that getting a loan now is much harder than it used to be. A poll by the American Sustainable Business Council found that 61 percent of business owners say that getting a loan is more difficult now than it was four years ago. Ninety percent think that the availability of small business loans is a primary concern.

The Bank of America study does show that business owners think that lending requirements should be more lenient.

As the larger banks merged and consolidated, their ability to evaluate a business on an individual level eroded. BofA seems to be trying to reverse this by hiring 1,000 small business bankers across the nation, which might help bring back some of the more personalized approach to lending. As Hilson says, “These small business bankers are charged with spending time, getting to know small businesses — what their plans are, challenges are, what their opportunities are — to better understand what they’re doing and how we can help them.”

The question is, as always, who are the people not served by these efforts? Despite the optimistic report from BofA, there are still many entrepreneurs who will not be able to access capital from the larger banks, even with new small business bankers. To really expand access to capital, the financial sector needs banks and robust alternative, community-based lenders who can reach borrowers that would otherwise be denied, discouraged, and left out.

May 31, 2012 at 2:26 pm

Craven County to Dissolve Economic Development Commission

The Craven County Board of Commissioners moved to dissolve the county’s Economic Development Commission (EDC) on June 30, coinciding with the retirement of Jim Davis, the EDC’s director of 17 years.

The EDC was founded in 1975 to increase the competitiveness of Craven County to attract and retain industry. It is made up of nine members, with one county commissioner sitting as a voting member. The EDC is supported by a non-profit organization called the Committee of 100, which raises funds through fees, investments, contributions, and state grants, to further the economic development goals of the EDC.

Reactions to the decision appear to be mixed. County Manager Jack Veit said that the commissioners have already begun a strategic planning process, and that like many other counties, this will help establish an economic development strategy that is best suited to the county. Others seem less optimistic, saying that now is not the time for a reorganization– particularly when there seems to be little information about what this process will entail or which direction the county will take.

Either way, this could represent an opportunity to craft an economic development strategy that really prepares Craven County for a long-term, sustainable economic recovery with broadly shared benefits. The poverty rate of Craven County was 17.5 percent in 2010, and some areas of the county are experiencing concentrated poverty. Between 2007 and 2010, the number of residents receiving food stamps increased 117 percent.

The county should make sure to incorporate a wide range of stakeholders and community voices, particularly those that are struggling the most.  Business attraction and retention are important outcomes, but a robust economic development strategy would also include addressing the needs of and creating opportunity for the county’s workforce and residents.

May 30, 2012 at 3:24 pm

The Main Street Alliance Releases an Agenda for Small Businesses & Local Economies

The Main Street Alliance released an agenda this week that outlines a range of policy prescriptions to support small businesses and local economies. The agenda is organized into eight policy arenas: the economy, the financial sector, the health care marketplace, the tax system, the regulatory system, the workplace, the immigration system, and the electoral system. Based on surveys of small businesses, this agenda also debunks some of the myths around small businesses on issues like taxes and regulation, and provides recommendations tailored to the specific needs of small businesses.

The set of recommendations on the financial sector include some very useful recommendations for increasing access to capital. One is to support cities and towns to move their deposits to community banks, which would increase the ability of those smaller banks to extend their small business lending. In exchange, the municipality can set expectations and benchmarks for certain community benefits that the banks would provide.

It would be useful to extend this recommendation to include credit unions. Although credit unions are able to accept public deposits, according to National Credit Union Association regulations, most states do not allow it (North Carolina included, see the map below).

The states shaded red allow municipal deposits to some degree. The blue states prohibit municipalities from depositing with credit unions. Source: Callahan & Associates. (http://www.creditunions.com/article.aspx?articleid=4686)

Changing the state regulations prohibiting credit unions from accepting municipal deposits would be a huge boost to the capability of credit unions to do small business lending. These deposits would enhance the portfolios of credit unions by increasing their net worth, allowing them to increase their lending activity and ultimately reach more small businesses. This would be particularly useful to Community Development Credit Unions, which serve those communities typically left out of the financial mainstream.

Combined with the agenda’s other recommendation to lift credit unions’ lending caps, this would be a big step toward increasing access to capital for small businesses in the state.

May 25, 2012 at 3:56 pm 1 comment

Report Explains Risk of Capping NC’s Gas Tax

We had previously blogged about the effort by some state legislators to cap the gas tax at 37.5 cents per gallon, and now the NC Budget and Tax Center has a new brief about how the cap would threaten the state’s transportation infrastructure. The gas tax, which accounts for more than half of the state’s revenue for transportation, has two components: one flat tax of 17.5 cents per gallon and another variable tax of 7 percent of the average wholesale price of gas over the previous 6 months.  The variable portion is adjusted twice per yer.

Although it seems like the gas tax has been high in recent years, the brief shows that when adjusted for inflation, the actual purchasing power of gas tax revenues is low compared to historical rates.

At the same time, the cost of construction and materials has increased (and is projected to continue to increase), further eroding the ability of these revenues to meet the state’s transportation needs. This is particularly important when considering the fact that many of the state’s roads, bridges, and railways are in need of repair or upgrades.  In addition, reducing transportation revenues could threaten funds available for other state programs and investments, as other states have diverted general funds to support transportation, in light of funding gaps.

An efficient, working transportation system is a key component of economic development. The Budget and Tax Center recommends limiting the volatility of the price-based component of the gas tax, while maintaining the flat rate. This would allow for a more stable revenue stream, but would also ensuring that the tax still kept up with changes in costs.

May 24, 2012 at 2:27 pm

Consumer Financial Protection Bureau Hearing on Prepaid Cards in Durham Tomorrow

The Consumer Financial Protection Bureau (CFPB) is holding a hearing on prepaid cards in Durham tomorrow, May 23, at noon in the Junior Ballroom of the Durham Convention Center. The event is open to the public, but you must RSVP by sending your full name and organizational affiliation to cfbp.events@cfpb.gov.

The issue of prepaid cards is an important one for low- and moderate-income individuals and families, as their use and prevalence has increased in the past few years. If you watch TV you’ve probably seen the commercials for Kimora Lee Simmons‘ prepaid RushCard, or you may have heard about the Kardashians’ dabble in prepaid cards a few years ago (the card was eventually discontinued) .

As we’ve blogged before, banks are getting rid of their free checking accounts and the increased fees are prompting many to close their accounts. Reinvestment Partners published a report on prepaid cards, which showed that from 2010 to 2011, households with checking accounts or debit cards decreased 4 percent and 12 percent respectively, while the use of prepaid cards increased 2 percent. While these are designed to serve low- and moderate-income, un- or under-banked individuals, they are often more expensive than checking accounts, even thought they cost less, and have fewer protections.

Reinvestment Partners. “8 Principles for the Reform of The Prepaid Debit Cards.” page 10.

(more…)

May 22, 2012 at 3:30 pm

National Small Business Week Begins Today

The two and a half day National Small Business Week conference on small businesses begins today in Washington D.C. There will be a range of topics covered, from disaster preparedness to securing government contracts. All the events will be webcast live for those who aren’t in D.C.

Are there any Small Business Week events happening in your community? Tell us about it in the comments.

May 21, 2012 at 3:11 pm

NC Ranks Low on Economic Mobility

A new study from the Pew Center on the States looks at the economic mobility, or the ability to move up  or down the earnings ladder, of residents in each state. The study looked at average earnings, their rank on the earnings ladder compared to peers, and their movement up or down the ladder. The report includes an interactive tool so you can see the results nationally or by region.

The bad news for North Carolina is that we rank as one of the nine states with the worst economic mobility, which means that over the 10 years analyzed, there was a consistent trend toward downward mobility and less toward upward mobility.

One of the key findings of the report is that while geographic mobility– whether people move to different states or stay in their home state– doesn’t impact the overall results for the state, it does have an impact on the individual level. So, people who move to different states have better mobility than those that don’t.

While NC has primarily been known as a state that people are moving to rather than out of, the question really is, what opportunities does the state offer and for who?  What’s going on in rural areas of the state? As the NC Justice Center reports, most of the job growth in NC has happened in the state’s metropolitan regions. 56 percent of the jobs created since February of 2011 were in Charlotte, Raleigh-Cary, and Greensboro-High Point, while only 3.3 percent of job growth occurred in the state’s 26 micropolitan regions. Furthermore, small and medium-sized towns saw an 8.6 percent decrease in their labor force in 2011, compared to a 1.7 percent increase in large cities.

These data show that economic opportunity is not evenly distributed throughout the state. Workers in some areas are moving out to seek opportunities elsewhere, either in other parts of the state or in other states all together. Economic development strategies should take these trends into account, particularly as many of the state’s local economies continue to struggle. Creating healthy urban and rural areas is necessary for a broad-based economic recovery.

May 18, 2012 at 2:50 pm 2 comments

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