Expanding Access to Credit for Small Businesses

May 04, 2022

SMALL BUSINESSES ARE VITAL TO THE U.S. ECONOMY, employing nearly half of U.S. workers and accounting for more than 40 percent of U.S. gross domestic product (GDP), according to research. Critical to these businesses opening their doors, thriving on a day-to-day basis and expanding their operations is access to affordable credit. 


Fostering recovery and navigating uncertainty 

The COVID-19 pandemic had a profound effect on small businesses for more than two years, forcing them to find new ways to conduct their operations amid shutdowns and accompanying state and local restrictions, while navigating government relief programs to try and stay afloat. While it seems the world may never know exactly what its “new normal” means, the pandemic effect has changed the way small businesses approach the market. In early April 2022, the share of small businesses reporting a return to normal business operations reached a pandemic-era high of 23 percent, according to the Census Bureau Small Business Pulse Survey. 

And though the days of “unprecedented times” seem to be behind us, supply chain challenges and other headwinds continue to disrupt operations and owners’ confidence in their businesses, according to the latest Equifax Small Business Lending Indices (SBLI). As the SBLI also shows, 49 percent of small business owners expect business conditions to worsen over the next six months, and are preparing their business resilience strategies accordingly.


Adopting practices that foster access to credit 

The past two years have shown that entrepreneurs are resilient and will do what they can to drive business success. A key component to small businesses realizing that success is opening up greater access to credit, and the pandemic brought to light just how impactful access to credit can be. 

Proprietary Equifax research conducted in 2021 in conjunction with Keybridge Public Policy Economics, “Unlocking Entrepreneurship: The Role of Credit Access in the Small Business Recovery,” shows that small businesses, primarily, Black-owned and Hispanic-owned firms were three times less likely and half as likely, respectively, to have received all the funding they requested in 2020. Research findings also show that from February – April 2020, the number of active Black-owned businesses fell by 41 percent, Hispanic-owned and Asian-owned businesses dropped by 32 percent and 26 percent, respectively, while Caucasian-owned businesses only dropped by 17 percent. 

These findings underscore the essential role of access to credit to the outlook of small businesses, including minority-owned small businesses, both during the pandemic and beyond. Small business ownership is key to promoting the financial health of communities, and such research reveals an opportunity to support small businesses by providing equitable credit access. 

Much of this starts with financial institutions, which are increasingly adopting practices that foster access to credit – particularly when it comes to lending. It takes more than one measure to understand ability to pay, and by layering additional data beyond the traditional credit score into lending decisions, lenders can open the door to opportunities that may not have been previously available to consumers and small business owners alike. 

Equifax is constantly working to provide solutions that expand access to credit – and help lenders say ‘Yes’ to more small business owners – with unique data assets ‘Only Equifax’ can provide. The company has also created educational resources to provide small business owners, as well as consumers, the tools they need to better understand credit, lending and more. And last but certainly not least, everyone can all show support this National Small Business Week – and beyond – by visiting their favorite local small businesses.