As prepared for delivery
WASHINGTON – Before I start, I would like to take a moment to thank Administrator Karen Mills for her outstanding leadership of the SBA. She has not only made the agency more efficient, she has made it more responsive to small businesses and entrepreneurs. During her time there, the SBA has made more than $100 million in loans supported. We could not have asked for a better or a stronger leader of the SBA than Karen. And I know I speak for everyone here when I say we are deeply thankful for her service.
In addition to Karen, I want to thank all those who organized today's conference—including those on Karen's team at the SBA and those here at Treasury, Matthew Rutherford, Cyrus Amir-Mokri, Don Graves, Tim Bowler, and many others. Finally, I want to thank all of you for participating in today's summit. I attended a few of today's sessions, and this has clearly been a productive day.
Let me say, it is really critical that we recognize the hard work of our small business owners and entrepreneurs—men and women who are determined to take risks, overcome barriers, and bring ideas to life. Small businesses are the engine of our economy. And because of you and the millions of small businesses and entrepreneurs across the country, the United States has the largest, strongest, and most innovative economy in the world.
Now, in the wake of the worst financial crisis since the Great Depression, small businesses and entrepreneurs have had to face some acute challenges over the last few years. One of the most significant of those challenges has been, of course, obtaining credit. And we know that without credit, you cannot get a business started. Without credit, no matter how hard you are willing to work, you cannot put a plan into action. So since Day One, this Administration has moved aggressively to ease the flow of credit.
First, we took steps to stabilize the financial system. Second, the President signed 18 tax cuts for small businesses into law so you could invest, innovate, and hire. And third, we focused directly on making credit more available.
Now, on the topic of making credit more available, we put in place a variety of strategies to get this done. We provided additional support to community banks, community development financial institutions, and credit unions. We ramped up Small Business Administration lending programs with the Recovery Act and the Small Business Jobs Act, which led to a record level of lending in 2011 and 2012. And we laid the groundwork for the creation of innovative financing markets with the signing of the JOBS Act.
At the same time, we developed new credit programs to unlock capital and encourage more small business lending. Two of these programs—the Small Business Lending Fund and the State Small Business Credit Initiative—are run out of Treasury, and they have been a success.
The Small Business Lending Fund uses a powerful incentive structure to encourage banks to make more loans to small businesses. Since it was started, banks and CDFI loan funds that are in the program have increased their small business lending by nearly $9 billion. And SBLF institutions have increased their lending by 38 percent compared to just 8 percent for similar banks that are not in the program.
Another program, the State Small Business Credit Initiative, was created to provide dollars directly to states so that they can meet the needs of local businesses. For every dollar distributed, this program is expected to unleash up to $10 in new lending, and help spur as much as $15 billion in lending to small businesses by 2017. Businesses all over the United States have benefited from this program, including a company that makes high-tech devices for the oil and gas industry in West Virginia, a biotechnology startup in Oklahoma, and a cellular tower manufacturer in Arizona.
But even though these policies are making a difference, everybody in this room understands we still have more to do. Every day, thousands of small businesses and entrepreneurs struggle to get a loan. In fact, in 2011 alone, roughly 8,000 small and micro businesses sought credit each day and were denied. That is more than 2 million businesses a year. When credit-worthy companies cannot get capital, it is a damper on job creation and economic growth. Small businesses produce most of the net new jobs in our country. So we want to do more to knock down barriers to financing. That is what today's summit has been about.
One of the sessions today was about new financing models that have been emerging to fill credit gaps. As we know, many small business owners look to obtain credit by opening a personal credit card or taking out a home equity loan. But this has become a problem given tighter credit standards and the fragility of the housing market. In recent years, though, a new type of financing company has arisen, and these companies are using alternative measures to assess a business' ability to pay back a loan. A number of these companies are here today, and they use data like real-time shipping schedules, records held in a business' accounting software, and even social media traffic to determine creditworthiness. These companies usually provide loans to small businesses quickly, and they extend loans of small sizes, which banks are typically reluctant to make.
These new financing models make it clear that greater access to information can translate into greater access to credit. And they demonstrate that government can help develop new ways for business owners to supply creditors with the kind of information that can lead to the distribution of more loans. Small businesses report a lot of useful information to the government on things like employee rolls and business expenses. If we could help these businesses share their information electronically when applying for credit, small businesses and entrepreneurs might have an easier time getting loans. This concept is central to the Administration's Open Data initiative, which is allowing both consumers and small businesses to take ownership of their own data, while rigorously safeguarding privacy, confidentiality, and security. As we have heard today, this points to a potential area for us to explore so that we can continue to help eliminate barriers.
While the government has a role to play in helping small businesses access credit, today's gathering has also made it clear that big companies can play a role as well. When Dow invests in start-ups, when corporate executives at the New York Stock Exchange mentor entrepreneurs, and when IBM uses small businesses as suppliers, it makes a real impact. The President has created several initiatives, like Start Up America, to get big companies involved, and we will continue to look at new ways to help bring large companies and small businesses together. But we need corporate America to continue leading by example as well. Their support is really crucial. So today I want to call on leaders of large businesses to do more to invest in new startups, mentor entrepreneurs, promote creative solutions for working capital, and become good customers to small businesses.
Let me close by thanking you again for participating in today's summit and also by thanking you for what you do every single day to keep our economy and our country moving forward. America needs you and all the small business owners and entrepreneurs out there to have a chance to succeed. And I will do everything I can so that we can turn our challenges into opportunities and build a better future together.