In the latest issue of the American Economic Review, the study “Big Loans to Small Businesses: Predicting Winners and Losers in an Entrepreneurial Lending Experiment” explores how psychometric data and machine learning can predict which businesses will succeed when given larger loans. While this method may have academic merit, it fails to address the realities of what truly drives small business and entrepreneurial success in America’s small towns and cities. At BusinessFlare, we understand that small business lending isn’t about running numbers through an algorithm—it’s about understanding the heart of a community and the personal grit of the entrepreneur. That’s where Street Economics by BusinessFlare comes in—our spinoff that focuses on actionable, on-the-ground economic solutions that make sense for the realities of local communities.

The study points to data-driven predictions to determine “top performers,” implying that machine learning can better allocate lending resources. However, this overlooks key factors that make businesses thrive in real-life environments, especially in local communities. The success of small businesses isn’t a product of risk metrics alone. It’s the relationships, local knowledge, and boots-on-the-ground support that truly make the difference.

At BusinessFlare, we created Street Economics to bridge the gap between academic theory and real-world economic development. While studies like this one focus on data-driven predictions, we know that small business success depends on far more than what can be predicted by algorithms.

In practice, Street Economics emphasizes three key factors that are often overlooked by traditional economic models to help guide our actionable insights:

1. Local-Context-Driven Insights: Success in small business lending and economic development isn’t just about what a data model suggests. It’s about deeply understanding the dynamics of the local economy. Street Economics focuses on analyzing economic trends through the lens of local history, culture, and existing relationships, providing actionable insights to local governments and organizations that drive effective development.
2. Strategic Support for Local Governments: Street Economics partners with cities and local governments to design strategies that enhance economic growth. We empower local leaders with the tools, data, and insights they need to create environments where businesses can thrive. By addressing all of the drivers of investment, we ensure that communities have a sustainable foundation for economic growth.
3. Building Resilient Communities: While data-driven models can predict short-term winners and losers, Street Economics is focused on building long-term resilience within communities. By helping local governments and organizations implement actions tailored to their specific needs, we create environments where businesses and residents can adapt to change, invest in their communities, and contribute to sustained economic health.

In contrast to algorithmic predictions, Street Economics takes a grounds-up approach to small business lending. By investing in community-driven strategies, we create more sustainable growth and foster resilience in ways that academic models often overlook. The goal is to ensure that businesses don’t just receive funding but are equipped with the tools and support they need to succeed within the context of their local economy.

The success of small businesses in America’s small towns and cities isn’t found in data points or algorithms—it’s found in the streets, where community engagement, practical knowledge, and resilience drive real economic growth. At Street Economics by BusinessFlare, we’re committed to working hand-in-hand with our partners to build stronger, more sustainable communities. Let’s leave the ivory towers behind and focus on solutions that make a real difference that helps entreperneurs and businesses not only survive but thrive in America’s small towns and cities.