Looking for a loan? Go Local, Small Business Owner, Go Local!

bank vaultThe first lesson a respected college professor taught his students was to not trust academic “experts.” If you look at the track record of these so-called experts, it’s never very impressive.

And it gets worse when public policy makers become involved. They find academics who take opposing views and try to shape the debate in the way that is most beneficial to their bigger supporters. And folks, small business owners don’t have a lot of clout with policy makers, which we’ll examine by looking at some recent news items concerning small business loans.

I find that common sense trumps “expert opinion” everyday and common sense says that the majority of jobs in your community have been created through the efforts of small business owners. On top of it being common sense, statistical data backs it up.

Standing against small business?

However, in recent years some academics have been arguing that small business owners are not the job creators we all thought they were and recently a group of four profs at West Virginia University and Georgia Institute for Technology have carried that a little further claiming that Small Business Administration backed loans are actually holding back economic growth. By the way, I love the headline Bloomberg Businessweek gave their article on this study: Small Business Owners and the Economists Who Hate Them.

Unfortunately, it seems that these anti-small business economists are joining elected officials who have a distinct preference for big business. While the economists are arguing against financial support for small businesses, there is no doubt that our lawmakers have been more than willing to financially support big business.

We have heard the phrase “too big to fail” used repeatedly in the last several years. I supposed the corresponding, unspoken phrase for small businesses is “too small to matter…politically.” And sadly, as the Wall Street Journal points out, an upshot of the too-big-to-fail philosophy has been to create a financial environment where huge cash reserves are tucked away in the vaults (or balance sheets) of the big banks where it will never be loaned out to small business owners – they just aren’t in that business.

The bankers in the white hats

But with all of this said, there are some good guys in the picture: your regional bankers. The small and medium sized banks are picking up the slack and lending to small business owners with little or no help from Washington. Why? Because they know local conditions.

Surprise! Common sense trumps the academic experts and the policy makers. The bankers who are close to the situation can recognize credit worthy businesses and opportunities for growth when they exist. And fortunately, more and more local bankers are seeing positive developments.

So what’s the takeaway here? It’s two fold:

  • Follow the college professor’s advice and don’t trust academic “experts,” and
  • Develop a relationship with a good local banker; that’s where you’ll find help when you need it.

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Image: By Jonathunder (Own work) [CC-BY-SA-3.0 or GFDL], via Wikimedia Commons.