The National Small Business Association recently published an “Access to Capital Survey”. On its face, the study is alarming, suggesting that perhaps a disproportionate number of small businesses have been shut out of “reasonable, affordable capital.” The study is interesting, but, as usual with ‘small business’ studies, this study covers a broad range of respondents, from the truly tiny, those having 0-5 employees, to the vastly larger, having even 100 to 499 (and 500+) employees. The broad range of companies having 20-99 employees was not broken down further. One single category included companies with revenues of $5 million all the way up to those with $25 million in revenues; companies with more than $150 million were tossed into yet another category. This makes it very hard to know what the other statistics mean.
This did catch my eye: “Nearly one in three (29 percent) small-business respondents report that, in the last four years, their loans or lines of credit were reduced. Perhaps even more concerning – nearly one in 10 had their loans or lines of credit called in early by the bank. Among those whose loan or line of credit was called in early, 19 percent were given less than 15 days.
Given that the average balance on a loan or line of credit is $256,060, 15 days is a death sentence for most small businesses. Adding insult to injury, 60 percent of those who reported changes to their loans or lines of credit stated that the reason was due to the bank’s internal risk assessment, and 15 percent weren’t even given a reason.”
Yes, the statistics suggest a lot of tragedy, but what were the circumstances? Were the decisions truly abusive? Had the businesses had to have known that they were approaching technical default? Had they violated other clauses? Had there been allegations of fraud but calling the loan was the most expedient way of handling the situation? What happened next?
This is what makes serving and growing small business, whether as a professional, a bank, a government entity, or a chamber or trade association, so difficult. “Small business” definitions, and even more “SME” definitions, cover a vast, ‘diverse’ range.