Access to Capital - Revision history

Juliette.richert at 17:49, 6 March 2017

2017-03-06T17:49:01Z

Carlin at 21:13, 2 September 2016

2016-09-02T21:13:26Z

ArielSun: Created page with "=About= Since the Great Recession of the late 2000’s, small business owners have encountered difficulties in getting :Access to Capital|ac..."

2016-06-01T21:35:46Z

Created page with "=About= <onlyinclude>Since the Great Recession of the late 2000’s, small business owners have encountered difficulties in getting :Access to Capital|ac..."

imported>Pedro: /* Overall Credit Loaning to Small Business */

2016-03-21T18:42:29Z

Overall Credit Loaning to Small Business

imported>Pedro: /* Overall Credit Loaning to Small Business */

2016-03-21T18:42:29Z

Overall Credit Loaning to Small Business

imported>Pedro: /* The State of Small Banks */

2016-03-21T18:39:50Z

The State of Small Banks

imported>Pedro: /* The State of Small Banks */

2016-03-21T18:39:50Z

The State of Small Banks

imported>Pedro: /* Since the Recession */

2016-03-21T18:38:03Z

Since the Recession

imported>Pedro: /* Since the Recession */

2016-03-21T18:38:03Z

Since the Recession

imported>Pedro: /* Slimming Credit Availability */

2016-03-21T18:36:35Z

Slimming Credit Availability

@@ Line 41: / Line 41: @@
 == Beyond Bank Loans==
 While alternative methods of financing (crowdfunding, online platforms for fundraising, and online term loans) have arisen in the wake of this "credit crunch", they still represent a drop in the bucket. Moreover, these alternative methods are widely unregulated, and are likely to undergo significant changes before they can be deemed as "mainstream" sources of capital generation. In the meantime, small businesses are looking beyond the banking system for a solution.
 [[Category: Internal]]
 [[Internal Classification: Legacy| ]]

← Older revision		Revision as of 21:13, 2 September 2016
Line 41:		Line 41:
	== Beyond Bank Loans==		== Beyond Bank Loans==
	While alternative methods of financing (crowdfunding, online platforms for fundraising, and online term loans) have arisen in the wake of this "credit crunch", they still represent a drop in the bucket. Moreover, these alternative methods are widely unregulated, and are likely to undergo significant changes before they can be deemed as "mainstream" sources of capital generation. In the meantime, small businesses are looking beyond the banking system for a solution.		While alternative methods of financing (crowdfunding, online platforms for fundraising, and online term loans) have arisen in the wake of this "credit crunch", they still represent a drop in the bucket. Moreover, these alternative methods are widely unregulated, and are likely to undergo significant changes before they can be deemed as "mainstream" sources of capital generation. In the meantime, small businesses are looking beyond the banking system for a solution.
		+
		+	[[Category: Internal]]
		+	[[Internal Classification: Legacy\| ]]

@@ Line 29: / Line 29: @@
 ===Overall Credit Loaning to Small Business===
-As a result of small banks' overall decline in activity, overall credit loaning to small businesses has taken a hit. In 2006, the Wall Street Journal [http://www.wsj.com/articles/big-banks-cut-back-on-small-business-1448586637] indicated that the share of small business financing occupied by banks was 60%. Projections from the Wall Street Journal have the current level pinned at about 40%, but the SBA [https://www.sba.gov/sites/default/files/files/sbl_12study.pdf] claims that the figure is closer to 51%. Regardless of the actual number, it is clear that banks' share of small business finance has fallen at an alarming rate. Why? Well, there is limited quantitative research on this particular field. Instead, researchers have been proposing anecdotal theories to explain the stagnation in bank loaning. In a couple of sentences, large banks do not have a proper and comprehensive system of vetting the qualitative assets (non-balance sheet, credit rating) held by small businesses. Consequently, there is no reliable way to ensure that a small business could be a prudent debtor.
+As a result of small banks' overall decline in activity, overall credit loaning to small businesses has taken a hit.
-Considering that banks can easily make loans to proven, solvent large businesses, there is little justification for making smaller investments in riskier assets. In other words, it is difficult to justify taking an additional risk for a smaller reward. Intuitively speaking, this makes sense. This perception of small businesses as inherently riskier than their larger counterparts is clearly evident in surveys conducted by the Harvard Business School [http://www.hbs.edu/faculty/Publication%20Files/15-004_09b1bf8b-eb2a-4e63-9c4e-0374f770856f.pdf] , Small Business Finance Institute [https://www.sbfi.org/capital-views/cre-lending-outlook/2015-cre-lending-outlook-survey/] [https://www.sbfi.org/capital-views/sba-guaranteed-lending-programs/sba-lending-outlook/2016-sba-lending-outlook/] , and the Kauffman Foundation [http://www.goodjobsfirst.org/sites/default/files/docs/pdf/levelfieldreport.pdf]. In each of these surveys, small business owners showed that they were frustrated with the lack of available credit, and cutthroat competition among their peers to acquire loans; over half of small business owners felt that they didn't receive enough funding. Meanwhile, most banks indicated satisfaction with the level of credit being extended to small business. A clear void has formed between banks and their small business debtors, and no evident solution currently exists.
+Regardless of the actual number, it is clear that banks' share of small business finance has fallen at an alarming rate. Why? Well, there is limited quantitative research on this particular field. Instead, researchers have been proposing anecdotal theories to explain the stagnation in bank loaning. In a couple of sentences, large banks do not have a proper and comprehensive system of vetting the qualitative assets (non-balance sheet, credit rating) held by small businesses. Consequently, there is no reliable way to ensure that a small business could be a prudent debtor.
 == Beyond Bank Loans==
 While alternative methods of financing (crowdfunding, online platforms for fundraising, and online term loans) have arisen in the wake of this "credit crunch", they still represent a drop in the bucket. Moreover, these alternative methods are widely unregulated, and are likely to undergo significant changes before they can be deemed as "mainstream" sources of capital generation. In the meantime, small businesses are looking beyond the banking system for a solution.

@@ Line 16: / Line 16: @@
 ===The State of Small Banks===
-Despite the significant credit rating deduction incurred by the recession, small businesses have been able to find loans from alternative sources. Traditionally, smaller banks have catered to small businesses unable to qualify for loans from institutional investors, or bigger banks. In 2010, small and community banks accounted for 48.1% of all small business bank loans, according to the Mercatus Center at George Mason University [http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2435206]. Consequently, small businesses have a vested interest in the well-being of their community banks. Unfortunately for small business, these community banks are disappearing at alarming rates.
+Despite the significant credit rating deduction incurred by the recession, small businesses have been able to find loans from alternative sources. Traditionally, smaller banks have catered to small businesses unable to qualify for loans from institutional investors, or bigger banks.
-Small banks have, since 1993, seen their total numbers fall by almost 50%. In 1993, over 11,000 banks were around. Nowadays, that number is closer to 6,000. Research suggests a relationship between this decline and other external factors . Primarily, it appears that many small banks simply cannot compete, and have dropped out of the market. A Mercatus Center report[http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2435206] shows that small banks' share of the domestic deposit market fell by 50% (from 40 to 20%) in the last 15 years. Meanwhile, the largest 5 banks have "picked up the slack" and acquired a current portion of 39.6%, contrary to their 19% holding in 2001. Beyond that, small banks' total assets have been halved since 2000, and don't show signs of improving. Smaller banks with consistently profitable operations have been acquired, so as to accommodate for higher regulatory costs, search costs, and transaction costs. In a nutshell, it is a difficult time for small banks. Trends indicate that consolidation is the most feasible route to maintain solvency in today's credit market.
+Consequently, small businesses have a vested interest in the well-being of their community banks. Unfortunately for small business, these community banks are disappearing at alarming rates.
 ===Overall Credit Loaning to Small Business===

@@ Line 10: / Line 10: @@
 ===Since the Recession===
-Since the recession, the NY Fed [https://www.newyorkfed.org/medialibrary/media/research/current_issues/ci17-4.pdf] observed that small businesses have been notably slower to recover than their large counterparts. Especially since 2009, larger businesses have posted higher growth rates in sales, inventories, and fixed assets. Actually, small businesses have seen their fixed asset growth go negative for the first time since 2006. All things considered, slower sales, inventories, and investment culminated in sluggish recovery for small businesses. By extension, banks have been wary of spurious loans, especially to small business, as their credit ratings have been adversely affected in recent years.
+Since the recession, the NY Fed [https://www.newyorkfed.org/medialibrary/media/research/current_issues/ci17-4.pdf] observed that small businesses have been notably slower to recover than their large counterparts.
 ===The State of Small Banks===

← Older revision	Revision as of 21:35, 1 June 2016
(No difference)

← Older revision	Revision as of 18:42, 21 March 2016
(No difference)

← Older revision	Revision as of 18:39, 21 March 2016
(No difference)

← Older revision	Revision as of 18:38, 21 March 2016
(No difference)

← Older revision	Revision as of 18:36, 21 March 2016
(No difference)