Among the many issues being discussed at the Clinton Global Initiative America conference in Chicago is how we can greater serve small businesses. This is fantastic! But if we don’t properly define what a small business is, then we may be tracking our progress inaccurately.
Yesterday morning President Clinton spoke before members of various non-profit, government and business entities and emphasized how important small businesses are to the economy. Driving capital to these small businesses is critical to ensuring their success. He mentions a recent commitment by big banks to increase small businesses lending by $20 billion over the next few years. However, according to big banks, a small business is any company with annual revenue of $20 million or less. Many of these companies have hundreds of employees. That doesn’t sound like the small businesses PCV works with. In fact, the majority of small businesses in the US earn revenues of $1 million or less. Raising the revenue criterion of a small business so high allows banks to make safer loans, but greatly distorts the market reality.
We need to properly define what a small business is in order to ensure capital is directed to those who need it most. Read more about the implications of defining a small business in this blog post by Ami Kassar, founder of MultiFunding.