(Joseph Glatt, The Hill) – Jay Clayton, the president’s nominee for chairman of the Securities and Exchange Commission, embraced broadening access to capital markets in the U.S. during his recent confirmation hearing. It was encouraging news for small and midsize businesses struggling to secure financing from traditional lenders. If Clayton is serious about increasing access, he should partner with middle market lenders to ensure that the small and mid-sized businesses driving this recovery can continue to prosper.
Small and mid-sized companies represent more than $10 trillion of the U.S. economy, but face tough hurdles trying to access capital from traditional banking lenders. Over the past 15 years, most of the local and regional banks that historically provided a vital source of capital for small businesses have either consolidated or shut down. As a result, these banks have reduced their lending share by as much as 44 percent.
This consolidation was followed by the 2008 market crisis, which led many large banks to substantially reduce their investments in the middle market. Given the retraction of traditional lenders, America’s small and midsize businesses are increasingly turning to business development companies (BDCs) to access vital capital.