Although most prognosticators seem to agree that the nation's economy is in recovery, there are some important segments that are still lagging behind. On the small business front, despite some helpful changes in the way that the Small Business Administration (SBA) evaluates loan guarantees, credit markets have yet to loosen up.
The White House is at least aware of the problem. Recently, President Obama met with Buffalo Wild Wings franchisees to discuss the need for some changes at the SBA. In particular, Obama mentioned the need to raise the cap on SBA loans from $2 million to $5 million. But is a higher loan cap enough? The key problem in small business lending is that banks still aren't loosening up their lending criteria enough to help the majority of franchisees and other small business owners that really need and depend on credit. While loan cap increases are helpful, they don't really address this problem.
During a press conference that followed the franchisee meeting, President Obama recognized the need to "make sure that small companies are able to open up and expand." However, as long as the banks don't have the incentive — or the confidence in the economy — to lend, credit markets are likely to remain tight. And, as a result, entrepreneurs and small business owners will continue to have difficulty finding the capital they need to create, or expand, their businesses. In my view, only after that problem is recognized and addressed will the situation really improve.
I think the changes on the credit market that are needed to help business owners are the flexible loans.