The recovery starts locally
Technically, the Great Recession is now well behind us in the rear view mirror, but you might not know this based on the continued slow growth of the nation’s economy. GDP growth during the tepid economic recovery has been far slower than past recoveries — it edged up just 0.1 percent during the fourth quarter of 2012 — and the national unemployment rate remains stubbornly high as well.
During times like this, it’s important to remember the old adage that “All business is local.” Just because the national economic picture isn’t rosy doesn’t mean that this is the case everywhere — far from it. Some areas of the country are booming economically, as are many industry segments like healthcare and technology.
The Survey Says…
A recent survey conducted by Bank of America points out how true this adage is. In the survey, to which 1,003 U.S. small business owners responded, 63 percent said that the majority of their customers are located within their local community. Just 27 percent, meanwhile, said the majority if their customers are located outside their local community, and just three percent said most of their customers are located outside the U.S.
Not surprisingly, 75 percent of the respondents said that the local economy plays a more significant role in their business success than the national or global economy. And while just 38 percent said they expect their local economy to improve over the next year, more than half (54 percent) expect their revenue to increase in 2013.
The list of small business owners’ top concerns also isn’t too surprising. Atop the list is “the effectiveness of U.S. government leaders,” followed by commodity prices, healthcare costs, consumer spending and the strength of the U.S. dollar. One thing that’s interesting is what’s not on the list of concerns: access to capital. Seven out of ten owners, in fact, believe they have enough access to capital to effectively run their business.
This points to the important role played by local lenders when it comes to helping small businesses grow. Unfortunately, the growing volume of banking regulations coming out of Washington is making it harder for many banks — especially community banks — to make loans to their small business customers.
Dodd-Frank and Basel III
The Dodd-Frank Wall Street Reform Act has placed higher capital requirements on banks and imposed a greater regulatory burden through new bank disclosure and reporting requirements. In addition, Basel III requires banks to meet minimum capital and equity requirements, which some experts fear may limit banks’ ability to make loans to qualified small business borrowers.