Thirteen posts later, here we are.
We started this series with a simple question. Why is it so hard for small businesses to get a loan? Charles H. Green spent 30 years in banking, founded his own bank, and then wrote a book that basically answers that question by saying: the system was never built to work for you.
Banks have been losing small business market share for 40 years. And somehow they still act surprised when another piece gets taken away.
Mortgages are simple. You want a house. You need a loan. The loan has a rate, a term, and a monthly payment. That’s why LendingTree worked. Plug in your numbers, get offers, pick the cheapest one.
Not every innovation in finance comes from a tech company. Sometimes the breakthrough is a better structure. A simpler fee. A smarter way to move money that already exists.
In 2012, crowdfunding grew 81% in a single year. By 2013, analysts were projecting $5.1 billion in global crowdfunding volume. Not bad for a concept that most people still associated with indie musicians begging for studio time on the internet.
Banks take months to decide if you’re worth lending to. Online lenders figured out how to do it in hours.
Type “small business loan” into Google and you get about 172 million results. That number alone tells you something changed. There’s an entire marketplace of funders out there competing for the attention of business owners who need money. And almost none of them require a lunch meeting.
A hundred billion dollars moved through new lending channels. And the banking industry barely noticed.
That’s the headline of Chapter 6 in Charles H. Green’s The Banker’s Guide to New Small Business Finance. But before he gets to the money, he tears apart the tools and rules that were holding the old system together. Or more accurately, holding it back.
Between October 2007 and December 2008, the Federal Reserve dropped interest rates by 5.25%. In fourteen months. That is one of the fastest, steepest rate cuts in history.
The ATM was invented in the 1960s. It took 25 years before most Americans actually used one. That’s how slow banking technology moved. Meanwhile, Amazon went from selling books online to becoming the most trusted checkout system on the internet in a fraction of that time.
Everyone saw it coming. Nobody did anything about it.
That’s the short version of what happened between 2001 and 2008 in American finance. Charles H. Green lived through it as a banker. In Chapter 3 of The Banker’s Guide to New Small Business Finance, he lays out exactly how the capital markets blew up and what it meant for small businesses trying to get funded.
There’s a scene in It’s a Wonderful Life where George Bailey is running a small bank, fighting to keep loans going to regular people. He’s the good guy. The bank is on the side of the little guy.
Most people think getting a small business loan is straightforward. You walk into a bank, show them your business plan, and they hand you money. Right?
Small business funding used to be simple. You walked into a bank, sat down with a loan officer, and either got the money or you didn’t. Then 2008 happened. And everything changed.