Access to Capital

About

Since the Great Recession of the late 2000’s, small business owners have encountered difficulties in getting access to capital. This difficulty has a pervasive effect on small business owners’ ability to not only start, but grow. Small business owners have, when surveyed, indicated that sparse access to capital is the primary threat to small business growth. Slimming credit availability, rising student debt, and ineffective regulation have culminated in an industry-wide decline in access to capital for small business.

Slimming Credit Availability

For over a decade, bank loans have been the most frequent form of financing utilized by small business. In the years following the "Great Recession", however, reasonable bank loans have been tough to come by. It is common knowledge that the recession was caused largely by the collapse of a market supported by risky debt. As such, banks were the focus of heavy regulation. Acts like Dodd-Frank especially impact smaller "community" banks, which commonly finance small business. Moreover, the markets for debt also penalized these banks, as demand for debt-backed securities stagnated, and even began decreasing. Since 2007, Banks have been cautious about the acquisition of new debt. Consequently, loan requirements tightened.

From a regulatory perspective, 2007 provoked a wave of interventionist, discretionary monetary, regulatory, and fiscal policy.