If there’s broad agreement that small businesses are the engine that powers the American economy, shouldn’t it be easier to fuel the tank?
Access to credit continues to bedevil too many U.S. entrepreneurs. Eighty percent of small business loan applications are rejected, according to some industry estimates, and more applications than we can count are never filed because of the difficulty of getting an appointment with a loan officer.
There’s a hunger among entrepreneurs to find financing to get their business off the ground or take the next big step in their expansion plan. Across the country, thousands of small business owners pound the pavement every day looking for term loans, equipment financing, lines of credit, invoice financing, and real estate loans to help them hire and grow. But too often, they’re wasting time they don’t have cold-calling and door-knocking their way to a lucky break. It shouldn’t be this way. If you have a bankable business idea backed by good credit and sound financial planning, you shouldn’t have to go begging to borrow.
Technology can help us address this problem. Online matchmaking services pairing lenders with prospective borrowers comprise a multibillion dollar industry. Perhaps you’ve seen the TV commercial in which a creditworthy home buyer goes online and is delighted to find banks competing to finance her house. Small businesses lending is the next frontier for these matchmaking services. Using the power of the Internet, commercial lenders are finding creditworthy small business borrowers, while entrepreneurs are finding loan officers who are ready to sit down and talk.
The SBA not only supports this concept, we’re implementing it. Today, at the National Press Club, I announced a new SBA initiative called LINC (Leveraging Information and Networks to access Capital). Our matchmaking service will help entrepreneurs get a date with a lender.
We spent months surveying our lending partners to discern what information they need before they’re ready to receive a loan pitch. Based on those talks, we’ve developed a simple online form with 20 questions that takes minutes to fill out. Once completed, the form is blasted out to participating SBA lenders in an applicant’s county, as well as financial institutions with a statewide or national reach.
While a positive “hit” it won’t ensure entrepreneurs will receive a loan, it will put them on a fast track, because they will have been pre-screened. If LINC doesn’t produce an immediate match, entrepreneurs will be directed to their local SBA adviser for additional assistance with their loan application.
To me, this is what good government is all about, acting as a virtual public square, where citizens can convene and collaborate. LINC is expanding small business lending options beyond someone’s local bank. Instead, technology can help them get their foot in the door on their merits at one of many commercial lenders.
The SBA is virtualizing what happens every day when a borrower walks into a bank to transact business, and we’re facilitating these connections for free. To my knowledge, this is the first time the federal government has implemented online matchmaking to help Americans access the capital they need. It’s part of SBA’s commitment to modernize to be as innovative as the small businesses we serve.
We’re rolling out LINC in two phases. Starting today, we will begin connecting small business owners with nonprofit lenders that offer free financial advice and specialize in microlending, smaller loans (our Community Advantage program), and real estate financing (our 504 program). Phase 1 is off to a strong start. We already have participating LINC lenders in all 50 states, the District of Columbia and Puerto Rico. These lenders have made a combined 42,000 loans totaling more than $17 billion since 2009.
Later this year, in phase 2, we plan to add more traditional banks that offer an even wider array of financial products. In the longer term, we also believe LINC could be modified to facilitate government contracting by connecting eligible small businesses with procurement officers, prime contractors, and federal buyers. The future is upon us, and the SBA is proud to be leading the way.