elizabeth a duke : small business credit – next steps speech by ms elizabeth a duke, member of the board of governors of the federal reserve, at the federal reserve meeting series : “ addressing the financing needs of small businesses ”, washington dc, 12 july 2010. * * * good afternoon. i want to thank all of you for participating in today ’ s discussion about the financing needs of small businesses. i particularly want to thank karen mills, the small business administration ( sba ) administrator, for her remarks and our distinguished panelists for helping us to better understand the dynamics of small business lending in these difficult economic times. i would also like to thank everyone who participated in the more than 40 regional meetings that led up to today ’ s conference and to thank the reserve banks for their sponsorship and organization of those meetings. they brought together small businesses, lenders, technical assistance providers, bank examiners and others involved in small business credit to help identify barriers to small business credit access and to suggest potential solutions. as many of you know, i came to the federal reserve after many years as a community banker. quite a number of those years were spent lending to the small businesses that were the backbone of my local economy. that experience gives me a deep appreciation for the importance of credit to economic growth and the particular importance of small business lending to job creation in local communities. so, as you might imagine, the recent decline in availability of credit to small businesses concerns me. it also concerns my colleagues across the federal reserve system. when the mortgage crisis first broke a few years ago, we were able to build a body of data and an understanding of relevant issues through a series of meetings convened by the federal reserve banks across the country on topics such as foreclosure or neighborhood stabilization. as we started hearing more about problems encountered by small businesses in accessing credit, we again tapped the broad footprint of the reserve bank system and the web of local contacts they have developed to help us better understand the issues surrounding loans to small business. i attended one of the regional meetings in june and was pleased to see firsthand the quality of the conversation that took place. today we have seen evidence that the conversations were equally rich across the country. the information gathered through this kind of outreach is invaluable as we consider our policy options, and i hope that you have found it similarly helpful. today ’ s agenda was organized around the common issues identified in those regional meetings. we looked at small business credit issues from

financing. we heard about the same issue with respect to many african american - and hispanic - owned businesses around the country. in other cases where efforts such as government procurement programs were instituted to help minority small businesses, we heard that the inability to secure credit to fulfill contracts makes these programs out of reach for many potential participants. it is also clear that minority - owned businesses would benefit from improved access to technical assistance and resources such as training in financial management, mentoring, and assistance with loan documentation that may not be in a business owner ’ s native language. but there are also hopeful examples of successful collaboration to address these issues. while in minneapolis, i toured the midtown global market, a multicultural marketplace that serves as an inspirational reminder of what can be accomplished when public and private resources combine to support minority businesses. research and data improvements finally, we spent some time today discussing the need for better data and analysis to monitor and understand small business credit flows. as a research institution, the federal reserve is always looking for opportunities to improve data, and we already have taken a number of steps in this direction. first, while banks do not report loans to small businesses separately, they do report information on business loans less than $ 1 million and farm loans less than $ 500, 000. the history of this data can be used as a proxy for small business lending. so in order to monitor lending to small business more closely, beginning with the first quarter of 2010, we have increased the frequency of this call report requirement from an annual to a quarterly basis. second, researchers from around the federal reserve system will gather at the federal reserve bank of minneapolis later this summer to compare notes on the research currently being conducted in the area of small business financing, identify any gaps, and develop ideas for future areas of inquiry. in addition, the federal reserve banks of atlanta and dallas have partnered with the ewing marion kauffman foundation to co - host a research conference, small business, entrepreneurship, and economic recovery : a focus on job creation and economic stabilization, which will take place october 26 and 27 in atlanta. through paper presentations and policy roundtables, the conference will help us gain a better understanding of the implications of various existing, new, and proposed policies related to small business and entrepreneurship, including new and expanded sba and cdfi programs. lastly, it is important to note that this meeting today and the regional meetings that led to it have introduced us to potential partners for furthering our research efforts in this area,