In the past few years, our once diverse and decentralized banking system has gone through dramatic change. Three out of every four dollars entrusted to banks are now held by just six institutions (sometimes referred to as the “too big to fail” banks). This change has significant implications for your family’s future, particularly in the area of job creation in your town.
These six institutions focus on profitable. large commercial loans, consumer accounts and credit cards, and approve only around one in six loan requests from small business. If you want a loan to start or grow a small business, they do not have the welcome mat out. The banks eager for your business are those banks that control the other one dollar out of every four — the 7,000 community banks. Get it? Six banks control three quarters of the money; 7,000 control the rest. In recent years, unlike the big banks, these community banks have approved one out of every two small-business loan requests. But there is a wrinkle.
Close your eyes and visualize a “small business.” How does it match up to this definition, which is the one used by lenders and the Small Business Administration: Construction — $35 million annual receipts; manufacturing — between 500 and 1,000 employees; retail trade — around $7 million in annual receipts.
You can see that the word “small” is misleading in this case; we need another term which is more descriptive. There is one. The technical term for a business with less than a $1 million in sales is “micro business.” Typically, such a business employs approximately five people. There are 27 million microbusiness in the United States. Almost all of them need capital to get up and running and, once running, to expand.
When the people controlling 75 percent of all the lendable money turn down five out of every six loan requests, and the most cooperative banks with the least amount of money to lend turn down one out of every two requests, the future of job creation through new business requires a rethink.
We need to fix this to create a better future.
The most common source of money to start up new business often comes from family and friends. One fun example is Jonathan Swift, an Irish Episcopalian priest, best known as the author of “Gulliver’s Travels.” Faced with Ireland’s overwhelming poverty in the 1700s, he organized an investment fund created by parish donors. This fund was loaned out in small amounts to other parishioners to help them break the cycle of poverty by enabling them to start a business and employ their fellow citizens. An early version of a “hand up” not a “hand out.”
Fast forward three centuries, and you find the modern equivalent on the Internet funding entrepreneurs.
In the world of business, the online solicitation of investors is called is called “crowdfunding.” This was given a huge boost last year when both political parties united to pass, and President Obama signed, the Jumpstart Our Business Startups Act. Microbusiness owners post their market analysis and business plan, and essentially solicit investors blindly. Interested parties can either make a loan, receive an equity interest in the new company or, in some cases, take a percentage ownership in some asset like a truck or real estate, or a combination of all three.
The best known site is called Kickstarter, started in April 2009. Just four years later, more than $381 million had been invested in new businesses! On Feb. 9, 2012, two projects (a charging dock for an iPhone and a computer game) tied for the honor of raising over $1 million in investment through Kickstarter in a single day.
Not all projects are this size. Two teachers in Billings, Mont., had an idea to create party dinnerware that locked a bowl into a dinner plate so that people attending a reception could carry both without spilling. They did a business plan, determined they needed a minimum of $20,000, posted their solicitation, and a few minutes later had their first $100. A few days later they had secured 300 investors and met their goal of $20,000.
If you Google “crowdfunding business startups” you will find more than 10 pages of links to explore.
We can create a better future with many new jobs if we study role models like Jonathan Swift in our history, update our view of how the world of big money is really working and adapt to new tools. You better get started — your kids need you to help them cope and flourish in this changing world.

Francis P. Koster lives in Kannapolis. He is the author of “Discovering the New America: Where Local Communities Are Solving National Problems,” available from Amazon.com and the CreateSpace eStore. For more information, visit www.TheOptimisticFuturist.org.