The Federal Deposit Insurance Corporation is best known as the independent agency that guarantees the safety of deposits in member banks. However, Sandra Thompson, the agencyâ€™s Director for Division of Supervision and Consumer Protection, points out that the FDIC has several programs in place designed to help small businesses.
Thompson leads the FDICâ€™s supervision of more than 5,300 state nonmember banks as well as its back-up examination activities for all federally insured depository institutions. She oversees a workforce of more than 2,700 employees deployed in six regional offices and 84 field offices nationwide. BLACK ENTERPRISE spoke with Thompson about those small business programs and the efforts the FDIC puts into helping community banks â€“ the institutions that handle the bulk of small business lending in the US. Hereâ€™s what she had to say:
BLACK ENTERPRISE: So what are some of the things the FDIC has in place designed to help small businesses.
Sandra Thompson: We have a financial literacy program called Money Smart and that provides financial literacy for adults, young adults, etcetera. And weâ€™ve just released a Money Smart for small businesses itâ€™s an instructor led curriculum that was developed jointly by the FDIC and the SBA. Weâ€™ve got all kinds of information on like financial management, recordkeeping, banking services that are available for small businesses. Credit reporting, risk management, insurance, tax planning, selling a small business, succession planning. Thereâ€™s just a host of information that we have in these modules for entities that are interested in starting a small business.
We also earlier this year held a small business forum on Overcoming the Obstacles to Small Business Lending and we wanted to figure out ways to stimulate small business lending to help recharge the economy. And as a part of that initiative we rolled out a hotline for small businesses to contact in the event that they had difficulty obtaining credit and we wanted to get a better understanding on those issues.
The number one problem with small businesses these days is getting that financing that they need, that capital. You mentioned that youâ€™re trying to address the issue, so what are some of the potential solutions?
Thompson: Well youâ€™ll recall that the Treasury Department had a program that placed capital in financial institutions, it was a small business lending fund and that took place last year. And that initiative placed over $4 billion dollars of capital in community banks so that they could make loans on Main Street to help small businesses grow and also to create jobs. Â We also worked with the Small Business Administration on different issues to encourage banks to participate in their various programs. But Iâ€™ll tell you understanding how small businesses operate, how to present cash flows, and how to present their balance sheet and their business plan, in a way that banks would understand, a lot of that is in our Money Smart for small business module. Just understanding the requirements that banks need so that they can make assessments to underwrite prudent loans I think is really important. So if you have all the information, getting it up front and putting it into a format that the banks can understand and use to make good lending decisions, I think is very helpful.
So if Iâ€™m an entrepreneur and I have gone to a few banks and Iâ€™m getting declined but I still believe in my business model, I still believe in my financial projections. What recourse do I have?
Thompson: Well I think one thing I would want to know is why I was getting rejected? I mean what is basis? Is it my business plan? Is it my financial projection? I mean do I have the right information? Or do I have the information that banks need to assess whether Iâ€™m going to be a good credit or a good borrower? Because those are the things that they have to take into consideration when they make the decision to grant a loan now. Am I a good credit? I think really looking at the business plan, really looking at the projection. Am I being realistic in my projections? And thatâ€™s why it leads you again to this Money Smart for small businesses curriculum where we set forth a prototype for some of the things that banks look at when theyâ€™re evaluating small business loans. And I just think that the information you provide is so important, the context is important and have a realistic financial projection is important as well.