"The Small Business Lending Collapse"
Annie Lowrey tells the tale of Aleks Duni, a DC businessman who wanted to open a restaurant in Washington’s retail-starved Bloomingdale neighborhood:
Consider, for instance, the case of Aleks Duni. He owns Veranda, a Greek restaurant in the Shaw neighborhood, as well as Heller’s Bakery and Marx Cafe in Mount Pleasant. The three small businesses together employ nearly 40 people and did well even during the worst of the recession. Duni set out to open a pizza restaurant on the main drag in Bloomingdale. He scouted out a location and secured the necessary permits, even getting a liquor license and thus a guarantee of good revenue. Now, no bank will lend him the $50,000 he needs to finish the job. “It is only a matter of getting the money,” Duni says. “If I did, I could be open in a month.”
Duni approached four banks about securing the loan to finish construction and open the doors. Each one said no. “There are a million reasons they give,” Duni says. “The first of them is that credit has been reduced.” Now, he says, he is concerned about continuing to apply for loans just to be denied. “If you apply and you don’t get the loan, your credit score goes down,” he notes. Frustrated, he has even sought the help of the Small Business Administration, the government agency. “They had nothing for me,” he says. “I don’t need to know what the loan requirements are. And the SBA cannot give me a loan.”
The Obama administration has taken steps to bolster small business lending and which “have successfully boosted SBA lending back to pre-crisis levels.” But realistically, we need SBA levels to be substantially higher than they were “pre-crisis.” That was, after all, years ago at this point so merely the same level doesn’t support an adequate volume of economic activity. In terms of the debate over how much of the recession is “structural” note that doing a buildout on a potential pizza joint uses very similar skills as building a house. Nor are the skills required to make deliveries to a restaurant or wash dishes absent in the economy. If we have enough growth, people will get jobs.