Small businesses in the Baton Rouge area have a harder time gaining financing for expansions when compared to their peers in five similarly-sized metropolitan areas, and need help preparing the documents required for loan applications.
This recommendation is one of several offered up in the Baton Rouge Area Chamber’s first ever Small Business Access to Capital Report, which contextualizes the challenges small businesses face nationally and locally in obtaining access to credit for expansions, additional workers and capital expenditures.
“We heard very clearly from members of our Small Business and Entrepreneurship Council that this issue is harming our small businesses and limiting their opportunities for expansion,” BRAC President and CEO Adam Knapp says in a statement accompanying the report, released this morning. “We learned through this report that, even though small business lending and access to capital is a national issue, the issues here in the Capital Region are perhaps even more challenging.”
The report includes data drawn from demographic and economic research, national reports, a custom survey of two dozen local commercial lenders, and interviews with commercial finance experts here and in five peer regions: Birmingham, Little Rock, Columbia, Memphis and Louisville.
There were approximately 60,700 small businesses in the nine-parish Capital Region in 2016—roughly 4,000 more than the year before. Small businesses account for 99% of all the region’s businesses and about 91.8% of jobs.
And while the Capital Region has an extremely strong small business sector, data from the Small Business Administration shows that lending rates to small businesses in Baton Rouge may be lower than in peer demographic communities.
Lending to small businesses in Baton Rouge topped $739.9 million—or $717.36 per capita—in 2015. But in metro areas like Little Rock, small business lending topped $1.97 billion, or $2,707.13 per capita. And in Birmingham lending topped $10.4 billion, or $9,097.31 per capita.
BRAC says the extent of the lending disparity between these otherwise similar metro areas is surprising, but there’s no obvious cause. It does note that the Baton Rouge area has particularly low rates of high net worth and high-income individuals, and a high level of poverty.
To expand access to capital in the Capital Region, BRAC suggests expanding financial education opportunities to produce an “entrepreneurship-ready” population, providing additional opportunities for low-credit borrowers, and protecting the Angel Investment Tax Credit to increase equity financing opportunities.