.webp){kind=small}
Approximately 6,000 Small Businesses Were Blocked from $4 Billion in Lending
- Cynthia Nevels
- Oct 29
- 4 min read
The People's Bank: Could SBA Be Replaced By Crowdfunding?
When President Eisenhower signed the Small Business Act in 1953, America was emerging from the Great Depression's shadow and World War II's economic upheaval. The Small Business Administration was created to "aid, counsel, assist and protect" small business interests, born from the failures of the Reconstruction Finance Corporation and designed to ensure small businesses could access their "fair proportion" of capital and government contracts.
Seven decades later, we're witnessing another pivotal moment in small business financing—one that could fundamentally reshape how ordinary entrepreneurs access capital.
The Forgotten Middle
Here's what most people miss about SBA lending: it was never meant to compete with venture capital. While VCs chase unicorns with average deals around $12 million, SBA loans averaged $458,584 in early 2024—serving the backbone businesses that VCs ignore. These aren't the next Silicon Valley darlings; they're the restaurants, manufacturers, and service providers that employ 61.5 million Americans. But what happens when SBA is shut down and no longer processing loan applications and guaranteeing capital? Conventional commercial loans replace them and that is much harder to underwrite or qualify for if you’re low on assets and in a higher-risk industry that relied on the backing of SBA.
Unlike venture capital, which requires giving up ownership and often board control, SBA loans let entrepreneurs maintain full ownership while accessing lower interest rates and longer repayment terms. This distinction matters because it determines who gets to build wealth in America.
When the Lifeline Gets Cut
The recent government shutdown exposed a harsh reality: each business day the government remains shut, 320 small businesses lose access to $170 million in SBA-backed loans. During the shutdown, approximately 6,000 small businesses were blocked from $4 billion in lending—not because markets failed, but because politics intervened.
This isn't just about delayed paperwork. These are businesses unable to make payroll, expand operations, or seize time-sensitive opportunities. The White House Council of Economic Advisers estimates every week of shutdown shrinks the economy by $15 billion.
The Rise of the People's Bank
But what if we didn't need Washington's permission to fund our neighbors' dreams?
The crowdfunding revolution is already here, just not evenly distributed. The global equity crowdfunding market, valued at approximately $2.1 billion in 2025, is projected to exceed $5 billion by 2032, growing at 13-15% annually. In 2024, U.S. companies utilizing Regulation
Crowdfunding raised $343.6 million—still a fraction of SBA's $45 billion, but growing rapidly.
Here's where it gets interesting: imagine if Americans redirected even a portion of their stock market investments toward local businesses they can see, touch, and support. The economic physics are compelling.
The Multiplier That Matters
Studies by Civic Economics found local businesses recirculate 48% of revenue within their communities, compared to just 14% for chain retailers—a 3-to-1 multiplier effect. Every dollar invested locally generates exponentially more economic activity than remote investments in public markets.
Consider this scenario: A metropolitan area with 500,000 households redirecting just $1,000 annually from Wall Street to Main Street crowdfunding. That's $500 million in direct investment, potentially generating $1.5 billion in local economic activity through the multiplier effect. Jobs created locally. Wealth retained locally. Communities strengthened locally.
The Infrastructure Already Exists
Platforms like Wefunder, StartEngine, and Republic have democratized access to startup investing. Since the 2021 increase in Regulation Crowdfunding limits to $5 million annually, even established businesses can raise meaningful capital from their communities. The UK's experience offers a preview— UK firms raised £335 million via crowdfunding in 2024 alone.
Metropolitan areas could leverage this infrastructure to create local investment ecosystems. Imagine city-sponsored investment portals where residents can browse, evaluate, and invest in neighborhood businesses. Municipal governments could provide tax incentives for local investments, similar to Opportunity Zones but controlled by communities, not distant fund managers.
“I was heavily involved in the crowdfunding industry when it first launched, and I have seen how it can change the lives of small business owners when done right,” states Cynthia Nevels, Growth Strategist and CEO of Integrality, LLC in Dallas, Texas
Beyond Capital: Building Community Equity
This isn't just about replacing one funding source with another. Crowdfunding creates a confidence lever—when banks see community validation through successful crowdfunding, they're more inclined to provide additional lending. It transforms customers into stakeholders, creating the ultimate loyalty program.
The innovation potential is enormous. Local investment cooperatives could pool resources for larger projects. Blockchain technology could enable fractional ownership and secondary markets for local business shares. Cities could issue "community bonds" backed by portfolios of local businesses.
“Entrepreneurs are going to have to hold on to cash, leverage assets they have, and be prepared for a long underwriting process for conventional business loans,” states a source from a Mezzanine fund in Texas.
The Path Forward
The question isn't whether this shift will happen—it's how fast and who will lead it. Early adopting cities that build robust local investment ecosystems will capture tremendous competitive advantages: resilient economies, retained wealth, and engaged communities.
For economic development professionals, the playbook is clear:
Educate communities about local investment opportunities
Partner with existing crowdfunding platforms for local campaigns
Advocate for state-level regulatory frameworks supporting intrastate crowdfunding
Create incentive structures rewarding local investment
Build the social infrastructure connecting investors with entrepreneurs
Only 42% of small businesses report satisfaction with their financing options. The government shutdown revealed our vulnerability to political dysfunction. But it also illuminated an opportunity: to build a truly democratic, resilient, community-controlled financial system.
The People's Bank isn't a building or institution—it's us, investing in each other. The technology exists. The regulatory framework exists. The need certainly exists.
The only question is: Will your community lead or follow?
What role should local governments play in facilitating community investment? How might your city build its own "People's Bank"? I'd love to hear your thoughts and experiences with local investment initiatives.
#SmallBusiness #EconomicDevelopment #Crowdfunding #LocalInvestment #CommunityDevelopment #SBA #Entrepreneurship #MainStreet
The contrast with venture capital really highlights that most wealth-building opportunities aren’t just in tech unicorns—they’re in the restaurants, manufacturers, and local service providers that form the backbone of our communities. I’m particularly intrigued by the idea of redirecting stock market investments toward local crowdfunding—it feels like we could finally turn Main Street into a more resilient ecosystem. It’s like playing snake game: if you only chase the flashy targets, you miss the steady, growing opportunities that keep your “snake” alive and thriving.