Small Business Loans and Trade Growth Trends: Blacks, Women, and Seniors Outpace National Average Business Growth

According to the U.S. Small Business Administration (SBA), 97.3% of all known exporters of U.S. goods are small businesses. It is no wonder that U.S. President Barack Obama recently urged banks to help stimulate the economy by reversing tight lending policies.

“Small businesses are the first to be able to hire, and they represent the vast majority of employment in North America,” said Chet Tschetter, Service Corps of Retired Executives (SCORE) chairman.

Small Business Administration Policies Promote Banking Lending

Small businesses may have been discouraged by recent bank lending practices that have tightened access to credit to both consumers and businesses. In line with the U.S. executive branch policies of encouraging small business lending, the SBA is promoting its SBA-guaranteed loans to encourage bank lending.

Now may be a good time to contact a local SBA office about their four main categories of SBA loan programs: 1) 7(a) Loan Program, 2) CDC/504 Loan Program, 3) Microloan Program, and 4) Disaster Assistance Loan Program.

The typical 75% SBA-guarantee on a bank loan has been increased to a 90% guarantee to encourage an increase in bank lending to small businesses, according to Barry Watson, Executive Vice President and Senior Loan Administrator of Cornerstone Bank.

Watson also noted that 3.5% of bank lending fees are waived under SBA-guarantee loans and tax incentives have been created to encourage hiring under the SBA loan programs.

With these new policies, SBA lending will be more favorable to risk-adverse bankers who have become accustomed to maintaining a short leash on the flow of commercial capital to small businesses.

Trend Shows Increase in Women- and Minority-Owned Small Businesses

According to the U.S. Census Bureau’s survey of U.S. business owners, from 1979-2003 minorities and women saw the largest increase in unemployed payday loans

  • 37% for African American entrepreneurs
  • 33% for women entrepreneurs
  • 15% for Latino entrepreneurs, and
  • 10% for White American entrepreneurs.

According to the U.S. Census Bureau’s survey, African American business growth has outpaced the national average to become the fastest growing small business growth segment. From 1997-2012, the number of Black-owned businesses in the U.S. grew 45% (to 1.2 million), with revenue during this same period rising 25% to $88.8 billion in 2012.

According to Ronald Langston, national director for the U.S. Commerce Department’s Minority Business Development Agency, a whole new generation of minorities are retiring from corporate and government jobs with great business skills and assets.

“They are looking to take their golden parachutes and start a business,” said Langston.

The self-employed over age 50 make up 25% of the U.S. workforce, but 40% of the self-employed. The AARP reports that self-employment among retirees will increase as more jobs disappear and people take early retirement.

On Main Street, it is about increasing the transactions in actual goods and services. The increased numbers of women, minorities, and seniors in business in the U.S. creates an opportunity to capitalize on this success by increasing capital lending into these markets.