Small Manufacturing Credit Crunch

The Cleveland Federal Reserve Bank recently posted an analysis of the reasons why small business lending has fallen off since the Great Recession, and cites four factors:

 

1.       Banks have been shifting away from small business credit markets to more profitable sectors since the mid/late 1990s.

2.       Small business demand for lending has eroded, as overall demand for their goods and services has eroded.

3.       Credit has been harder to get, driven by reduced creditworthiness (as real estate values have fallen).

4.       Banks have tightened lending standards, reducing the number of small companies able to qualify.

 

Policy corrections will need to address all these factors to be effective, but one solution that cities, counties and regions could explore is establishing/augmenting loan guarantee funds to help open the credit spigots again, and making sure that small businesses are fully tapping the SBA 7(a) programs (the major Federal loan guarantee program for small businesses).

See the report here:  http://www.clevelandfed.org/research/commentary/2013/2013-10.cfm

 

 

Building Regional Prosperity, #2 and #3

The Regional Prosperity Project brings together economic development initiatives from 8 regions to share notes, compare strategies and find ways to overcome barriers to broadly shared regional economic prosperity.  Supported by the Surdna Foundation, the Project is in its 2^nd year.

 

I was invited to talk with the group when they held their Cleveland meeting this August.

 

One of WIRE-Net’s main “prosperity” strategies has been our role as a champion for reinvestment in urban industrial infrastructure – specifically roadway projects.  WIRE-Net has been an advocate and partner in $47 million in successful projects over the last 6 years, projects which have positively affected hundreds of manufacturing and other companies, and tens of thousands of jobs. 

 

WIRE-Net’s third major impact on manufacturing jobs has been through its continuum of work in youth and adult job training.  WIRE-Net’s adult programs have evolved over 25 years – starting with the Hire Locally Program, the Machine Trades Sectoral Initiative (MTSI), and now continues as WorkAdvance-NE Ohio in partnership with Towards Employment. All of these projects show that an employer led, grassroots approach can attract trainable entry level workers from urban neighborhoods into targeted manufacturing occupations like precision machining and welding, get them to work, and boost earnings in significant ways.  The MTSI experience also shows that by working in coalition with other industry groups (like the PMA, PMPA, and OAMF), training providers can be persuaded to strengthen their programs, making them more relevant and valuable to industry.

 

WIRE-Net is also addressing the severe shortages in young talent that are projected to affect the skilled, technical manufacturing occupations (machining, welding, robotics, mechatronics) by working with middle and high school youth.  WIRE-Net is the partner behind the New Max Hayes High School program, which is redesigning career-tech education so that it addresses the challenges of educating urban youth, connecting them to relevant, authentic learning and work, and gets them on a path to well paying, family-supporting wages.

Manufacturing Regional Prosperity

By:  John Colm, President & Executive Director, WIRE-Net

The Regional Prosperity Project brings together economic development initiatives from 8 regions across the USA to share notes, compare strategies and find ways to overcome barriers to broadly shared regional economic prosperity.  Supported by the Surdna Foundation, the Project is now in its 2^nd year.

I was invited to talk with the group when they held their Cleveland meeting this August, hosted by the Fund for Our Economic Future.

I discussed the 2-3 major ways that WIRE-Net has worked to grow manufacturing jobs, and to connect those new opportunities to low and moderate income communities and individuals.

First on my list was WIRE-Net’s company by company efforts to understand what the main challenges are to growth and “hassle-free” operations in older cities like Cleveland, and to connect manufacturing leaders to resources to get over those barriers to growth. 

WIRE-Net manages the Cleveland Industrial Retention Initiative (CIRI) which aims to bolster Cleveland’s economy as NE Ohio’s largest city.  Over the past 6 years of CIRI under WIRE-Net’s management and partnership with the Cleveland Department of Economic Development, CIRI has helped attract or retain 4800 jobs and $200 million in payroll within Cleveland.  Clearly CIRI is an important tool and asset in Cleveland’s redevelopment efforts.

I’ll share the other two strategies in later posts.