$52 Billion At Stake: Loan Declines for Small Businesses Hindering Advancement


Roughly 8,000 business loan requests are declined every day in America. “Daily business loan denials are symptomatic of a massive market failure,” says Connie Evans, president and CEO of the Association for Enterprise Opportunity (AEO). “Our analysis shows it’s a failure to deliver an estimated $44 billion to $52 billion in critical capital to Main Street. Each time business owners are denied requests for capital, it hinders their ability to start, grow or hire,” she adds.

AEO has forged a plan to unblock the flow of capital to Main Street. AEO recently shared its proposal at a Congressional Briefing, with opening remarks from Senator Maria Cantwell, (D-WA), chair of the Senate Committee on Small Business and Entrepreneurship. The goal is to develop more programs that encourage more community lenders to distribute critical financing to small businesses.

AEO’s policy team successfully advocated to continue the SBA’s Program for Investment in Microentrepreneurs (PRIME) program and increase its funding, which had been slated for elimination. The program was funded for $5 million, which is an increase of $1.5 million over current funding levels.

The capital gap to Main Street businesses represents $44 billion to $52 billion in unmet demand. AEO estimates that about one-third (30%) of entrepreneurs who are declined for business loans are credit-worthy using underwriting methodologies currently available in the market.

To identify solutions, particularly regarding access to capital in amounts of up to $250,000, AEO formed the Micro Capital Task Force (MCTF), a private multi-stakeholder group to present fact-based and practical recommendations to the White House, the Department of Treasury and the Congress. Evans, a MCTF co-chair, says the MCTF represents the largest cross-sector collaboration to address this issue.

Many rejected business loan applicants need capital to start or expand their businesses. AEO cited for example, Lasenta Lewis-Ellis, who despite owning a construction company that grossed $1.1 million in 2013, was recently declined for two working capital loans that would have been less than $25,000 by two banks. Experiences like Lewis-Ellis’ are common among the nation’s 25.5 million microbusiness owners.

In a time when the long-term unemployment rate is holding steady, Mitch Jacobs, MCTF co-chair explains, “We simply need a financial system that works for Main Street, and the MCTF’s collaborative approach is a tremendous milestone to that end. We are confident in our recommendations, and hope Congress will take note of how we arrived here, viewing it as a private-sector model for their own participation.”

Another example of private-sector co-action is AEO’s partnership with OnDeck, a technology-powered lender. OnDeck has deployed more than $1 billion in capital to tens of thousands of businesses across 700 different industries. The company grew 150% in 2013, and was recently named No.11 on Forbes’ 100 Most Promising Companies in America list

For a trial period, OnDeck will waive the licensing fee on its short-term working capital loan products distributed by community lenders in AEO’s 450 member and partner network. OnDeck’s technology streamlines the loan process for small businesses.

“Our MCTF and partnership with OnDeck are model examples of the power of strategic collaboration to bring change to Main Street – to create jobs, rebuild communities, and open more doors,” AEO’s Evans adds.

In 2011, 92% of U.S. businesses were microbusinesses, which generated approximately $4.87 trillion annually for the U.S. economy. America’s 25.5 million microbusinesses influence job creation by contributing to the employment of 41.3 million individuals, which represents 31% of private sector employment. AEO reports that microbusinesses are a key driver for America’s employment and economic health–if one in three Main Street microbusinesses hired just one employee, America would reach full employment.


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