Hi I'm Michael Barr under dean of the Gerald R. Ford School of Public Policy at the University of Michigan and I'm here today to talk about small businesses and the American economy small businesses are essential to economic growth in the United States as you can see from this figure there are 30000000 U.S. small businesses and they account for the employment of 47.5 percent of U.S. employees 2 thirds of net new jobs in the past 25 years have come from the small business sector so they're really essential for the U.S. economy it's really hard to succeed as a small business and one of the biggest reasons for small business failure is lack of adequate access to capital this economy even a bigger problem since the Great Recession was so badly hurt us small businesses commercial loans are hard to come by and you can see from this chart the commercial lending has been declining as a share of all the big ones for 20 years and now it's only a 21 percent this drop in traditional commercial lenders has created some interesting opportunities for the synthetic sector these lenders utilize technology new credit models and alternative data to reshape the small business lending market they can often provide access to credit to a wide range of businesses they can help get loans delivered more quickly there are all kinds of advantages that might help increase efficiency in the economy and improve outcomes for small businesses at the same time these new lenders sometimes create opportunities for abuse there are far too often situations in which small businesses are paying extremely high interest rates for example one study found that on average small businesses in the study were paying 94 percent interest and in some cases size 350 percent it's also the case that small businesses are often exposed to hidden terms and features that are. Not easy to understand and it's very difficult to compare across different kinds of lung products because there's no Truth in Lending Act 1st of all this is that these problems can be even more acute for minority borrowers who are often more exposed to these kinds of abusive terms so what can we do well we can start by understanding that small businesses like households need some financial protections most small businesses finances are more like households that major corporations the average revenue of a business with 5 or fewer employees is only $95512.00 that's pretty close to the median household income and a lot different than the median revenue of the top 10 Fortune 500 companies with 230000000000 in revenue and most small businesses do not have the same access to financial their accounting skills or consulting available to larger firms even though most small businesses are more like people that like General Motors they get no federal protection or uniform disclosure laws but there's no truth in lending after other federal consumer protection and personal businesses that's one of the things that really has to change in the face of many of these bad practices in the market and recognizing there tonight yet federal protection there is growing support for something like the small business borrower Bill of Rights the small business part of rights which set up by the responsible business lending college has a group of nonprofits and for profit lenders small business advocates and foundations designed to improve protections in this market. For example that there are a bill of rights calls for the right to transparent pricing in terms there's not a significant growth in the attention paid at the state level in California for example the legislature recently passed a law to provide important disclosures 1st of all business owners in that. That and we're seeing this trend growing in other states as well and finally there's a growing interest in taking on these challenges at the federal level we really need several policy to step in and provide important consumer protections for small business owners and continue to provide ways to innovate in the market and increase access to capital that's so essential for small businesses to us.