Developing Small Businesses and Leveraging Resources in Detroit: An Informed Discussion among Financial Institutions, Policymakers and Other Stakeholders in Detroit
In October 2012, the Federal Reserve Bank of Chicago, the Michigan Bankers Association and the New Economy Initiative for Southeast Michigan co-sponsored a symposium in Detroit that brought together business experts, business owners, policymakers, funders and bankers to explore issues around access to small business credit and financing in Detroit. As Alicia Williams, vice president of the Community Development and Policy Studies (CDPS) division, explained in her opening remarks, the symposium was a follow-up to meetings hosted around the country by the Federal Reserve System’s Community Development offices, as part of an initiative to address the financing needs of small businesses. During the course of the two-day symposium, presenters discussed the small business landscape in Detroit and made recommendations for increasing the supply and availability of resources to these firms. The symposium also highlighted a study conducted by staff of the Chicago Fed’s Community Development and Policy Studies division on the changing financial landscape of Detroit and its implications for access to financial services and for lending to small businesses in the city’s low- and moderate-income neighborhoods. Drawing banks more closely into the dialogue about neighborhood revitalization was an important goal for the symposium.
This article summarizes contributions from presenters, focusing on three major themes of the discussion: the opportunities and challenges that characterize the small business environment in Detroit; the implications for small business borrowing given the banking and regulatory climate; and strategies to leverage capital and other resources to support small business in the area. Overall, presenters described a city with formidable challenges, but one that is also rich in resources for small businesses in terms of producing talent, providing technical assistance and offering both bank and nonbank financing. While lending has been hampered by declining real estate values and a shift in underwriting practices, many banks and community-based funders actively utilize government and foundation programs to deliver capital to small businesses. Presenters also offered a range of strategies, some already in development, for building linkages between banks, small business service providers and other funders to maximize their ability to serve small businesses.