Downtown Carrollton


I was initially drawn to this recent Wall Street Journal story because it’s situated in a small town just minutes outside of Atlanta, and probably only about 40-50 miles (as a crow flies) from our office. But the situation in Carrollton is just a microcosm of the issues facing the US economy as a whole; what’s happening there is happening in small towns all across the country.

In a capitalistic society growth only happens when there is access to capital, and one of the key reasons why this recovery has been so much slower than in the past is because of a lack of it. While lending for large corporations has largely recovered, small business lending has not.

The latest official survey of senior loan officers showed that banks have loosened standards more quickly for medium and large companies than for small ones.

Traditionally, small community banks have operated on a “relationship” basis — local bankers get to know the local business owners, and deals are stuck at local ballgames or restaurants. While larger banks have relied on top-down standards and economies of scale, the smaller banks flourished by finding small, niche lending opportunities. This in turn, helped local communities as entrepreneurship flourished and, more importantly, jobs were created.

In Carrollton, which has a population of 24,958, and surrounding Carroll County, though, entrepreneurs like Ms. Shirey still are wrestling with the impact of six bank failures since 2007. Those banks held more than half of deposits in the county. Loan originations in a six-county area that includes Carroll County are 40% below pre-recession levels… 

But all that has changed now that the Fed has tightened lending standards for all lenders, including the smaller community banks. Now, if a business doesn’t “tick all the right boxes,” they don’t get access to capital.

“Relationship lending is gone,” says Todd Anduze, director of the government-funded Small Business Development Center in Carrollton, which advises small firms on financing and business planning. “Now, if you don’t fit into their box, you’re not getting that loan.”

Therefore, small businesses don’t grow and hire new employees. This is one of the reasons there is such a disconnect between Wall Street (which is actually doing pretty well these days) and Main Street (which is improving but still too slowly.)