The following is an excerpt from a speech given by a representative of the Federal Reserve in response to questions about what they have done to increase credit to small businesses. It is quite revealing and informative.
"Participants in the nationwide meetings recommended improving access for CDFI (Community Development Financial Institutions) loan funds to participate as guaranteed lenders in the SBA 7(a) program in order to increase the availability of credit to the underserved markets that depend on CDFIs. Later, the Small Business Administration (SBA) rolled out two pilot programs aimed at increasing the number of loans in these communities. The Community Advantage program will increase the number of lower-dollar loans in underserved communities by allowing CDFIs, and other mission-focused lenders, to originate SBA 7(a) loans up to $250,000. Also, the Small Loan Advantage program is structured to encourage larger, existing SBA lenders to make lower-dollar loans, which often benefit businesses in underserved markets.
Meeting participants also expressed support for additional low-cost, long-term capital for CDFIs. Such capital would allow CDFIs to price loans to reflect their risk and still offer an affordable rate to small businesses that may not qualify under conventional bank standards and products. One participant recommended that policymakers consider capital models for CDFIs that further leverage private dollars and create innovative incentives for the private sector to partner with experienced CDFI fund managers with strong risk-management capacity. Soon, as part of the Small Business Jobs Act, the U.S. Treasury will provide up to $1 billion annually in federal guarantees for the next three years for bonds issued by CDFIs for community development purposes. In addition, the act established a $300 million Small Business Lending Facility for Community Development Loan Funds. The regulations for both of these programs are currently under development.
At this point, I am pleased to tell you that recent anecdotal evidence leads me to believe that conditions are improving for small businesses. Although no definitive data source exists, the combination of a variety of recent survey results paints a picture of increasing optimism about future sales and business conditions and a corresponding easing of credit availability for small businesses.10 While this upward trend is encouraging, the Fed is continuing to look for ideas that will help small businesses as they work through some of the more subtle issues constraining their overall growth.
Going forward, we will coordinate a series of regional forums for financial institutions and CDFIs on the use and deployment of small business programs authorized in the Small Business Jobs Act and on sharing information about issues and successful practices at a national level. The forums are being organized with participation from the Opportunity Finance Network (OFN), the trade organization for CDFIs; the SBA; the Treasury; the CDFI Fund; and our partner regulatory agencies. In addition to providing information to regional forum participants, we will seek to use these forums to gather information on best practices, trends, and any barriers to the successful implementation of these federal programs. This year's work will culminate with a November conference at the Board of Governors, in partnership with the Federal Reserve Bank of Atlanta, to discuss small business credit and workforce training issues facing entrepreneurs-particularly women and minority entrepreneurs and those living in low- and moderate-income communities. Because jobs and the needs of low- and moderate-income communities remain a priority for us, we will continue to foster collaborative efforts in hopes of additional innovative responses."
If you want to read more, check out the entire speech.