Editorial: New business-lending avenues can help create more jobs
Big numbers capture attention. When dissecting employment, politicians and statisticians like to take the 50,000-foot view, where jobs are counted in the thousands and millions.
But on the ground, in most places, employers create jobs one at a time. An entrepreneur takes a risk on an idea, and a job is born. As that business grows, a few more jobs are added, and if the business takes off, a few more and then more.
The failure rate in these scenarios is high, but according to the Small Business Administration, the net result is job gain. While small and large businesses provide about the same number of jobs in total, the SBA says, overall growth comes from the small-business sector.
Small businesses are wealth creators.
That's not how most lenders look at startups, though. For two recent stories, the Business Journal talked to local entrepreneurs whose frustrations in securing financing have taken them down two very different paths.
One, video game design firm Lighthammer, decided to move out of the midstate. Owner Paul Benninghove expects relocation to North Carolina will put him in an environment more conducive to getting critical financing.
The other, hot-sauce maker Torchbearer, decided to stay put and grow through unconventional means. Partners David Lynch, Ben Smith and Tim Wortman are using the Internet to "crowdfund" a $16,000 phase of a planned expansion. In crowdfunding, many people contribute small amounts — from as little as $5 to a few hundred.
Several companies now are in this business of matching entrepreneurs and backers. Indeed, for an example of how a simple idea can lead to job growth, look at crowdfunder Kickstarter. Launched in 2009 with three people, it now employs 40.
Is crowdfunding a threat to conventional lending? Probably not — nor should it be. We're sure every loan officer recalls turning away an entrepreneur while secretly loving the applicant's idea. But businesses that rely on talent, hard work and an idea lack collateral in their early stages. We expect responsible institutional lenders, accountable to shareholders and regulators, to be careful and put their money where the assets are.
The real challenge for entrepreneurs in the midstate is the lack of venture capital and private equity investors. Startups need to know where to go and whom to ask if they aren't eligible for conventional business loans. That's not easy.
This country was built by entrepreneurs, who will always bear the greater part of the risk in a new venture. The rewards, for those persistent and creative enough to overcome obstacles to success, will be theirs as well, although we all benefit — one job at a time.