Smallest of Businesses Underserved

The demand for small business loans is picking up.


A Greenwich Associates survey recently found that small businesses increased their seeking of loans in the first quarter of this year by 100 percent over the previous quarter.

That’s the good news.

The question is how many of these small businesses actually received a loan. According to Greenwich, on average about 60% of the small businesses they surveyed received the credit they sought between March 2010 and March 2011. And the majority of these loans came from smaller, community banks.

But even with signs that big banks are trying to get back into the small business lending game, not all small businesses will be served by the traditional financial institutions, big or small.

Greenwich surveyed only small businesses with annual revenues between one and 10 million dollars. The entire category of microenterprise business doesn’t even appear on any lending radar.

Microenterprises are small businesses typically with 5 or fewer employees and started with $35,000 or less. While census data shows that about 53% of South Carolina businesses have between 2 and 4 employees, when you throw in all the sole proprietor microenterprises make up to 89% of our state’s businesses that account for most net new jobs.

If we in South Carolina and in this country really want our economy to grow, getting financing, training and consultation for microenterprises to start and grow is essential.

Today these microenterprises primarily finance their businesses out of their own pockets, loans from friends or through credit cards. This is an extremely inefficient way of growing small business and basically leaves to chance that the start-ups that could grow into larger employers will be created at all.

This week I’m attending the Annual National Microenterprise Conference in D.C. sponsored by the Association for Enterprise Opportunity. When I return, the South Carolina Small Business Chamber and other interested organizations will make plans for a microenterprise forum on May 25th to kick off June as microenterprise month in South Carolina thanks to a Legislative resolution sponsored by Representative Ken Hodges.

You’ll be hearing more about all this later.