Many small business owners say they have difficulty obtaining information about financial products, “which may contribute to a less competitive market,” according to a report released this week by the U.S. Treasury Department. Among other things, the report recommended that capital providers consider how to “deepen” small business access to capital, and that policymakers consider requiring more uniform disclosures about financial products.
The Treasury Department report on small business financing examined recent technological changes and barriers to obtaining capital. Based on outreach to small-business owners and other stakeholders, the authors concluded that “gaps” in business owners’ knowledge about financing structure, terms and risks presented one of the greatest barriers, as did capital providers’ knowledge gaps about small business creditworthiness. It also cited tight credit standards, high interest rates and fees, and the “imperfect match” between business needs and financing structures as other barriers.
The report made several recommendations for improving small business financing. Among them was a recommendation that capital providers explore ways to expand small business access to capital, “including through leveraging government programs (such as Small Business Administration programs) within prudent risk management standards.” Another is for legislators and regulators to research whether small business owners would benefit from more uniform product disclosures across product types. It also suggested capital providers consider voluntarily developing uniform disclosures “with understandable terms for small businesses, including information about repayment terms and fees.”
