By: Michael Myhre [This op-ed appeared in the Orlando Business Journal on Monday, May 20th.]
In 2016, more than 112 million tourists visited Florida — shopping at our small businesses, eating at our restaurants and staying in our hotels — ultimately supporting our local economy. While our state has a robust tourism industry supporting many jobs, our unemployment rate remains ranked at 32nd in the country, and our small business startup rate has failed to fully recover from the Great Recession of 2008.
Our state’s economy is on a slow uptick of progress, but more work needs to be done to boost economic growth back to pre-recession levels. Specifically, we need to ensure small businesses — which represent 99.8 percent of all businesses in the state — have the necessary resources to not only begin operations, but also to expand. Without healthy small businesses, everything from exports to taxes to jobs and beyond are negatively impacted.
As the CEO of the Florida Small Business Development Center Network, I work closely with our local business community and many of the struggles I hear from small business owners come down to money. Not only does the process of researching and applying for loans take on average 24 hours, but most owners are not able to get the full loan amount needed, especially if they are applying for less than $250,000. One report found that when business owners request $100,000, the average amount actually secured is only around $40,000.
A major factor contributing to this decline in lending is the current one-size-fits-all banking policies enacted under the Dodd-Frank Reform Act. While regulations are needed to ensure the safety of our national financial system, Dodd-Frank’s misguided attempt treats all banks with more than $50 billion in assets the same without looking at their larger business profiles including their banking activity or customer base. This is problematic when you consider that regional banks, which focus largely on consumer, business and commercial lending, are lumped in with the largest money center banks, which engage in high levels of risky trading activity and are at least six times bigger than the largest regionals. The biggest bank, JPMorgan, is 19 times the size of Regions Bank, one of the regional banks with a presence in Florida.
We need a better system that keeps financial institutions accountable while reflecting their vast differences, all without impeding small business growth. It’s time to move to a system where risk is measured by several different factors, instead of asset size alone. Looking at just a bank’s asset number is like looking at just one piece of the puzzle: It doesn’t tell the full story.
How can we be sure this multi-factored system works? The Treasury Department has used this approach to measure risk, finding that while JPMorgan has a risk score of 5.05 percent, no regional bank scores above a .35 percent. If we used this system, regulations would be tailored to those vast differences so no bank is burdened by complex requirements that tie up capital and employees with compliance.
If our state economy is strong, the effects trickle down to the rest of us in the form of lower taxes, higher property values, vibrant towns and jobs. Florida’s representatives in Washington have to act in the best interest of their constituents. Let’s help small businesses — and our economy — grow.
Michael Myhre is CEO of the Florida SBDC Network