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U.S. Small Businesses Still Struggling to Find Financing

February 21, 2012, 07:00 AM
Filed Under: Economy

According to an article posted on the Economic Voice, if the domestic recovery is ever to take off, it will be because small businesses are expanding, buying equipment, and hiring new employees. After the financial crises, banks all but turned their backs on these firms, citing high credit risks and abundant losses already on their books from “toxic” mortgage-backed securities.
According to the article, Citibank, Chase, Bank of America, and Wells Fargo, recently released press releases proclaiming their increasing support of this sector with statistics that seem to defy the actual reality of the marketplace. However, the article cites Raymond J. Keating, chief economist at the Small Business & Entrepreneurship Council, saying, “Many small businesses are either struggling to get by or simply keeping their powder dry when it comes to capital investments, hiring and borrowing.” He objected that the majority of banks that he surveyed did not see any increase since most small-business owners are holding back due to the uncertainty in the economy.

This article also cites Ami Kassar, founder and CEO of Philadelphia-based MultiFunding, who also takes issue with the claims of the “Big Four” banks.  Mr. Kassar notes that the banks’ definition of a small business includes firms with as much as $20 million in annual revenue which are more stable, less risky, and able to get the attention of large banks.  He stated that the inclusion of these banks in the banking data misrepresents their true support of the small-business sector, where annual revenues are more likely to be $1 to $2 million a year. From IRS data, some 95%, or nearly 25 million, of the businesses that file tax returns have less than $1 million in annual sales.

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