Access to Capital for Small Businesses

Taking a different turn here with this post - I am going strictly with my feelings on this topic. That will probably get me in hot water somewhere in someone's office but this topic is a big one for me.

Recently, a client of mine came to me with a idea that I felt skeptical about mainly because I could not understand his small business idea. He was persistent in making it happen as he had the passion for it and had a successful model to follow. We worked on the business plan and he produced a solid one. He got it. He went to four banks and after six months, the fourth agreed to fund him. I was so excited for him.

Another client has an even stronger idea for a small business in the area and she also has a strong idea. In fact, if we can get this to happen, it will be the only retail outlet between St Louis and Memphis offering the product locally. With this client, she cannot get funded from any bank. We have practiced the pitch and interview, reviewed the business plan for weaknesses and tightened the financials even more. She finally turned to her personal retirement fund and is now moving forward. We went to six area banks and not one would even touch it past the first meeting.

So here is the question - if small business start ups provided 70%+ of the new jobs in the last 10 years, why do they have such a hard time getting financed? Yeah yeah the fact that only 10 out of 100 survive the first 5 years is a biggie but the loans are secured so the banks can get thier money. They even have the SBA guarantee option for the loans also.

I know there are many conversations starters with this topic and are started every day in my world of small business development. But why is it so hard to get an answer out of a bank?

Share with me your thoughts and opinions on this one.