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Hidden Costs of Small Dollar Loans

Earned wage advances (EWA) and cash advance products are small, short-term loans that are typically repaid on the consumer’s next payday either directly from a bank account or as a payroll deduction.
Consumers access these products using an app on their smartphone by linking their bank accounts or by enrolling through their employer. The costs of these very short-term loans are not always transparent to consumers, who often pay fees and leave tips to access money and run the risk of unexpected overdraft fees. Workers who are already living paycheck to paycheck may frequently find themselves pulled into a cycle of reborrowing that depletes their net earnings and further erodes their financial stability. Through a mixed-methods approach, this research aims to better understand the costs and risks of using EWA and cash advances as well as their impacts on the financial lives of low- and moderate-income consumers.

2024 Report on Employer Firms

The 2023 Small Business Credit Survey (SBCS) shows signs of a further waning of the effects of the COVID-19 pandemic on firms, as challenges closely associated with the pandemic—like supply chain issues—eased between 2022 and 2023. Measures of firm performance remained elevated well above pandemic-era lows and remained steady year-over-year but lagged prepandemic levels. 

Best Practices for Equitable Lending

Development finance agencies (DFAs) are tasked with providing financial services to underserved communities in order to see them grow and thrive. DFAs are defined here as community lenders including but not limited to community development financial institutions (CDFIs), credit unions, banks, private firms, finance authorities, and public agencies across both the private and non-profit sectors. Furthermore, this paper addresses issues faced by commercial lenders in the DFA space. Because no two communities are exactly alike, DFAs often differ in how they address the unique challenges to capital access that small businesses in their communities face. DFAs should consider the unique needs of their communities and borrowers while maintaining focus on responsible lending and risk management.

Redlining the Reservation

The Community Reinvestment Act of 1977 sought to address the practice of redlining – the intentional exclusion by banks of minority, immigrant and poor communities from financial services. In late 2023, new CRA regulations specifically included Native Land Areas for the first time. This paper sets a baseline for measuring access to capital by tribal communities in hope of a more just financial services landscape in Indian Country.

A View of PPP from the Inside

This brief examines the financing activity, financial performance, and efficiency and operations of
Opportunity Finance Network’s member CDFIs that served as PPP lenders. These members devoted a
substantial portion of their fiscal year 2021 lending activity to PPP, had higher self-sufficiency and change
in net assets than non-PPP lenders, and achieved high rates of operational efficiency. In the short term,
PPP provided an essential economic lifeline to businesses and communities. It may have also enhanced the
enduring ability of CDFIs to advance mission impact.

Understanding CDFI Financial Data

This brief highlights sector dynamics that provide important context for any analysis of individual CDFIs, and shares suggestions for both the CDFI industry and investors new to the sector for how to improve understanding of CDFI financial metrics.

State of Inclusion in Financial System

The State of Inclusion in the U.S. Financial System follows Aspen FSP’s report, Towards a National Strategy for Financial Inclusion, and moves from making the case for why the U.S. should have a National Strategy for Financial Inclusion to how. In this publication, we introduce U.S. policymakers to an assessment of the current state of inclusion in the U.S. financial system, and share processes, disparities, gaps and assess the overall state of inclusion.

Small Business Capital: A Place-Based Approach

Accelerator for America and the International Economic Development Council are excited to present the first segment in a two-part series exploring the needs and opportunities to drive more equitable entrepreneurship and small business growth in communities across the U.S. This first piece addresses equitable capital access, and the second will delve into the other critical elements of the entrepreneurial and small business ecosystem that are necessary to foster inclusive growth. Both parts of the series will focus on the role that mayors, local governments, and place-based philanthropies can play in addressing gaps and creating more equitable opportunities in their communities.

New Tools to Capitalize CDFI Growth

This brief addresses a set of critical questions that will arise as the industry puts this powerful growth strategy to work, focusing on how CDFI funders and investors should reconsider how they interpret key financial metrics related to portfolio quality, capital deployment, and earned income for CDFIs that are selling loans. For example, to more accurately assess the lending activity of CDFIs that are selling loans, we recommend that funders request and evaluate total assets under management rather than simply looking at outstanding loans held on the balance sheet or total deployment ratio.

Building Ecosystems for Black Entrepreneurs

According to the latest US Census data, there are more than 3 million Black-owned businesses in the country; 66% of these have fewer than ten employees, and 17% have no employees other than the owner. Despite making up just 3% of small businesses nationwide, Black-owned enterprises provide critical services to their communities, and they contribute substantially to both local and national economies through hundreds of billions of dollars in wages, spending, and tax revenue. However, historical and structural inequities have created significant obstacles to success for Black entrepreneurs, limiting their ability to start, grow, and scale their small businesses. This research study, with a specific focus on the experiences of established Black-owned small businesses, reveals new findings about the nuances of their successes and challenges, and lays out specific tools needed to build a truly supportive ecosystem for Black entrepreneurs.