In this Issue...

Recently I participated in a national event hosted by the Board of Governors as part of the Federal Reserve's efforts to address small business financing needs. The System convened key stakeholders to share their perspectives on the needs of small businesses. Prior to hosting this conference, local events were held throughout the country to identify credit gaps in small business financing, gather information on regional differences in access to credit, and identify best practices that can be replicated in other markets.

The St. Louis Fed's Community Development department conducted four of the local meetings in our district—in Missouri, Arkansas, Tennessee and Kentucky—but the key takeaways from the meetings were similar:

• The economy continues to be an issue for small business. Many business owners have maxed out their credit cards or their credit limit has been reduced, which was a primary source of capital for business owners. With banks cutting credit card limits, owners are finding it harder to get other types of credit.
• Stronger underwriting standards are limiting the supply of loans to small business. Financial institutions have returned to more traditional underwriting standards that are more dependent on equity and cash flow, rather than credit scores.
• The demand for small business support services and assistance from Small Business Development Centers is on the rise. Technical assistance providers report they are currently seeing a different type of client. The business owner who was the traditional bank customer is now seeking the assistance of support service providers and searching for alternative funding sources.
• The U. S. Small Business Administration (SBA) loan programs are good; however, most financial institutions have not taken advantage of the new programs and increased guarantees. Many still have the perception that SBA products require too much preparation, and monitoring and resolution of problem loans is too cumbersome.
• Creating a synergy between financial institutions and support service providers is needed to sustain small business development. A referral system and better communication is needed between the organizations.

Our Community Development team continues to work with stakeholders and community leaders to address these issues locally. This edition of Bridges highlights additional efforts to identify issues and solutions for both small businesses and the commercial real estate market.