This post was co-authored by Chicago City Treasurer Kurt A. Summers, Jr. and Brad McConnell, CEO of Accion serving Illinois & Northwest Indiana.
It’s difficult for most small businesses to obtain a loan. Just ask Margo Strotter, owner of Ain’t She Sweet Cafe, which now has two locations–one in Bronzeville and one in Beverly.
When Margo was starting out she was her own bank, but she knew that wasn’t a long-term solution to her capital needs so she eventually sought help from traditional lenders. Unfortunately, those institutions were either unwilling or unable to help Margo.
Then she had a breakthrough. While attending an event at the Urban League, Margo was put in touch with Accion, a lender that is committed to helping small businesses, particularly those in underserved communities. She ended up receiving two loans from Accion over the years: The first helped her get her business off the ground, the second came 10 years later and allowed her to expand to a second location.
In Chicagoland, there are a lot of Margos. In fact, the area is home to more than 230,000 small firms, making it the country’s third-largest small business hub. And yet, as big banks focus on big businesses, it has become harder and harder for Chicago’s small business owners and entrepreneurs to secure reasonable loans from responsible lenders.
Entrepreneurs are a vital component of a thriving American economy. Indeed, small businesses represent 99% of all employer firms and account for half of our nation’s jobs and economic output, and their creativity spurs innovation in all sectors of the economy. That’s why it’s important to take time to appreciate our country’s entrepreneurs during November, which is National Entrepreneurship Month.
During National Entrepreneurship Month, policymakers should recognize our nation’s innovators and job creators by taking time to address the primary issues that are holding them back, including lack of access to capital, the need to stabilize healthcare costs and fairness in tax reform efforts.
Improving access to capital is one of the most crucial issues for entrepreneurs. Small Business Majority’s polling found 90 percent of small business owners identify access to capital as a top concern. This finding is no surprise given that many small business owners are still struggling to access capital post-recession. And when small businesses are approved for loans, it’s often not for the full amount requested. In fact, the Federal Reserve found of those small business owners who did receive a loan, only half were approved for the full amount requested. Continue reading
When Jose Rodriguez opened OFBS NOW, a small insurance and brokerage agency in Pasadena, he knew that one day he might want to take out a loan to grow his business. After three years of success, he’s getting ready to take that next step — but he has some trepidation.
“I’ve seen a lot of my small business peers take out bad loans and become trapped in cycles of debt,” said Rodriguez. “Before taking out a loan, I wanted to make sure I had all the right information so I didn’t fall victim to predatory lending.”
Entrepreneurs aren’t afraid of taking risks and finding new ways to tackle old problems, which is a reason why small businesses create two-thirds of all new jobs and support 55 percent of all jobs. Without small businesses, our economy – and our local communities – would crumble. That’s why it’s important to take time to appreciate our country’s entrepreneurs during November, which is National Entrepreneurship Month.
Whether entrepreneurs are creating jobs, pushing important new ideas or simply brightening up the main street of town, their hard work is vital to our economic fabric. But small business owners face too many challenges that keep their businesses from thriving. During National Entrepreneurship Month, we should focus on what we can do to help fulfill the promise of the small business economy.
Entrepreneurs are a crucial part of our economic fabric. They create jobs, challenge convention and find new ways to solve old problems. But U.S. entrepreneurship is on the decline. The number of companies less than a year old as a share of all businesses has fallen nearly 44 percent between 1978 and 2012, and in 2008, we hit a disturbing milestone: The percentage of new businesses created that year was smaller than the percentage of businesses that closed down. That’s a serious problem for our economy, which depends on new businesses to hire and pump new blood into our markets.
What prompted this turn for the worse? Many factors may have contributed, but one development is having a definite impact: It’s become harder for entrepreneurs to access loans or other sources of funding for their businesses. The recession choked off many traditional sources of financing, with a particular impact on bank loans. In fact, many banks, still cautious from the downturn, have reduced or eliminated loans valued below $250,000. Other banks simply won’t lend to businesses with annual revenues of less than $2 million. This change has hit small businesses particularly hard, as 68 percent of small businesses seek loans of $250,000 or less, and 50 percent seek loans of $100,000 or less.