How SBA Loans Accelerate Local Jobs

As a young boy, one of my favorite stops as I walked home from Gundlach Elementary in North St. Louis was the penny candy counter at the corner store. On Saturdays, I walked several blocks to the locally-owned laundromat, playing my fair share of video games while I waited for my clothes to wash and dry. At age 12, I was fortunate to get my first big job doing odds and ends for Weeden Construction, a small Black-owned firm.

In working for local businesses since childhood, I experienced how small businesses stimulate economic activity and create jobs. Small businesses like these represent 99.9% of all businesses and employ 47% of all workers. While a small business is defined as one with fewer than 500 employees, the truth is that more than half have four or fewer employees.

Within the many neighborhoods in our region, local community-based businesses shape our collective culture, composition and convening. They also help build community wealth, for the business owners, the people they employ and the communities they help flourish.

The most universal challenge faced by small businesses is access to capital, whether to bridge delays in getting paid or to fund growth and expansion. Many mainstream financial institutions shy away from making small business loans, whether due to the absence of a balance sheet, insufficient collateral or length of time in business.

This is where the Small Business Administration (SBA) enters the picture. While many are skeptical about government programs being good for society, the widespread benefits of SBA’s Payroll Protection Program (PPP) were apparent. As a banker, I saw firsthand how PPP helped save more than five million businesses as Covid changed consumer and business behavior and disrupted supply chains to the breaking point.

Since its founding in 1953, the SBA has worked hard to help small business owners access capital. It has delivered millions of loans, loan guarantees, contracts, counseling sessions and other forms of help to small businesses. The flexibility of the SBA’s credit terms is just what many small businesses need to grow.

One of the SBA’s big benefits is that SBA loans provide short- and long-term loan guarantees to help borrowers better position themselves for mainstream financing. Make no mistake. Banks still examine business cash flow, collateral, capacity, credit, and history of keeping promises. But the SBA loan guarantee provides a huge boost to securing financing for small businesses. SBA loans can be used for working capital and to purchase an existing business, refinance a current business debt, or purchase furniture, fixtures, and supplies. SBA financing also can be used to buy a building, finance ground-up construction or building improvements, or purchase heavy machinery and equipment.

There are 2,500-plus SBA lenders in the country and the SBA loan products are identical across lenders. Businesses interested in exploring SBA loans may want to choose a bank that wants to know you and will expedite decisions. Working with a local lender who knows your market ensures the more personal attributes of credit evaluation are considered above and beyond the 5 Cs of credit. Streamlined loan review by local decision-makers gets capital to work within local businesses faster.

Small businesses are a big deal and the SBA is a valuable resource. As the backbone of the economy, we need to prioritize access to reasonably priced capital to help small businesses flourish. The payoff from nurturing startups and adding capital as an accelerant will help our neighborhoods by scaling up local businesses, creating new jobs and building neighborhood vibrancy.