Addressing Access to Capital Challenges
Small businesses, defined by the Small Business Administration (SBA) as independent businesses with 500 or fewer employees, make up 99 percent of all businesses and account for more than 90 percent of jobs in the region, according to Your Economy. While the region’s small business community is certainly thriving in many ways, small business owners’ inability to access capital or obtain sufficient financing can hinder their capacity to grow their businesses, create jobs, and stay competitive.
Recognizing the importance of a thriving small business community and the difficulties a challenging commercial lending market can cause for small business owners, BRAC released a report to contextualize the state of small business lending in the Capital Region using demographic and economic research, national reports, a survey of two dozen local commercial lenders, and interviews with commercial finance experts.
Based on the findings of the report, BRAC has provided a list of recommendations to address these challenges:
- Expanding small business counseling resources in the Capital Region to help businesses prepare cashflow projections, business plans, and other information required for loan applications will address significant needs of the region and potentially increase the per capita lending rate of the region.
- As the low average credit score in Baton Rouge hinders would-be entrepreneurs from starting businesses and current business owners from expanding, expanding financial education opportunities is instrumental to producing an entrepreneurship-ready population.
- Providing additional opportunities for low-credit borrowers, such as expanding the number of local institutions tailored to the needs of small business owners and entrepreneurs with less than perfect credit, such as CDFIs, or increased SBA lending by local banks, could increase the pool of capital available to these borrowers and expand economic opportunities in high-poverty areas of the region.
- Protecting the Angel Investment Tax Credit will create the opportunity for the region to increase equity financing opportunities. Since 2011, the Angel Investment Tax Credit program in Louisiana has incentivized more than $201.4 million in investment into small and growing companies across the state.
The release of the report was accompanied by a panel of commercial lending experts moderated by BRAC’s Small Business and Entrepreneurship Council chair Kim Sanders. Both the panelists and SBEC members engaged in a dynamic discussion about their experiences with small business lending in the region and what lenders, small business owners, and the community can do to improve the state of small business lending in the region.
Written by Brooke Hathaway
As Economic Research and Policy Analyst at BRAC, Brooke conducts research and performs data collection to support key policy focus areas, including workforce development, education, and others.