America's Largest Companies Can Boost Small Business
As a reader of Exabyzness you are well aware of the funding shortage causing small businesses to forestall new investment projects and hires. Indeed, as a result of the financial crisis, small businesses, especially startups with little if any track record, have found access to credit much more difficult. The credit standards, lending rates, and banks preference for tangible assets have risen to the top of problems for small businesses seeking credit. On the other side, big businesses have been hoarding cash since the crisis to shore up their finances and reduce risks. In total, this cash being set aside is estimated to range from $1.5 trillion to $2.8 trillion. That is a lot of money desperate for yield and a recent TechAmerica Foundation study suggests that this money on the sidelines could be used to help small businesses gain access to credit and have a rapid boost on the economy. Harvard Business Review continues, “What if the idle cash sitting in the treasury accounts of our largest companies could be used as collateral to secure these loans? For years, entrepreneurs lucky enough to have a wealthy Uncle Harry or Aunt Sue have used third-party guaranties and third-party asset pledges to bridge the collateral gap. A private-sector-driven "Uncle Harry" could fill in where the SBA Loan Guaranty program falls short, and shift some of the burden away from the public sector and taxpayers to ensure that rapid-growth enterprises have access to the capital needed to fuel growth.
Apparently we cannot count on traditional sources such as venture capitalists, angel investors, and private equity firms to do this. They have also been slow to step up the pace of investment, as the number and size of firms continue to shrink and the number of total dollars and deals involving these sources and RGEs has dropped significantly since 2007. The JOBS Act allowing some degree of equity-driven crowdfunding may help chip away at this problem, but we await the regulations to guide us through the details…”
Source - HBR