With limited financial sophistication, entrepreneurial consumers approach the financial marketplace more like retail financial consumers than like business customers. However, an assumption of both legislators and regulators is that business borrowers are more financially savvy than consumer borrowers and thus do not require protections that are as broad reaching. This gap between marketplace policy protections and the lived reality of the vast majority of small business entrepreneurs sets the stage for entrepreneurial consumers to fall through the regulatory cracks, creating the potential for exploitation and abuse. This situation may be exacerbated for minority entrepreneurs, who belong to protected classes that generally are more vulnerable to exploitation in marketplaces, including the small business lending marketplace. This article details the current status of the policy gap relative to minority entrepreneurial consumers and presents a matched-pair mystery shopping study to demonstrate the critical need for reliable, primary data to inform regulatory agencies as they work to implement appropriate protections to ensure equal access to credit across the small business lending marketplace.
Resource Category: Access to Capital
Bank Credit to Small Businesses
In February 2019, the Office of Advocacy published a fact sheet titled “Small Business Facts: What Is the Status of Bank Credit to Small Businesses?” written by Victoria Williams, Research Economist. The fact sheet finds that small business lending growth lagged behind large business lending growth from 2016 to 2017. While small banks had higher shares of small business loans relative to their assets than large banks, large banks issued the majority of small business loans overall. Read the fact sheet to learn more.
Food Systems & Development Finance
CDFA is pleased to announce the debut of our first white paper on how traditional development finance tools can be used to demonstrate the viability of the food system as an asset class. Many food-related initiatives, projects, and businesses have lacked sufficient resources and financing for economic and community development, largely because the food system as a whole has not been formally defined as an asset class.
Before Getting An Online Business Loan
Simply put, the purpose of this e-book is to help you fully understand what taking on an online loan truly involves and how it can impact your bottom line.
While many money guides are loaded with jargon and confusing language, we break down everything you need to know into easy-to-grasp terms and examples based on real-life situations.
2017 Nonemployer Firms Credit Survey
Nonemployer firms are important to the United States’ economy, comprising 81% of all small businesses, employing 17% of the American workforce, and generating $1.2 trillion in annual sales. While previous research has explored why individuals seek self-employment or what conditions drive nonemployers to become employer firms, less is understood about the financial experiences and challenges of nonemployers—namely, whether or not nonemployers are succeeding financially.
Financial Security of Single Women
The gender wealth gap continues growing even though single women have benefited from regulatory protections to reduce wealth stripping and have had increased access to institutions, products, and services that help them build wealth. This growing gap not only impacts their financial security in retirement but also their ability to pass resources on to future generations.
To shepherd our collective efforts and move the needle to improve the economic well-being of single low-income women, we must understand how asset inequality is compounded by structural barriers to wealth building for women, including accessing income, tax benefits, social services programs, and financial products and services.
Lending in Underserved Markets
The contribution and importance of small businesses to the nation’s economy is well-researched and understood; for minority-owned small businesses, the impact and significance are even greater. Not only do minority-owned small businesses help drive job creation, raise wages, and elevate better standards of living, they also offer a critical pathway for Black and Hispanic populations to close the racial wealth gap. An increase in entrepreneurship among people of color can create income for both entrepreneurs and the people of color who work at the businesses. Yet, starting a new firm or growing an established business requires capital, and Black and Hispanic businesses have higher barriers to accessing capital.
Veteran Entrepreneurs and Capital Access
Part of the US Small Business Administration’s mission is to facilitate a successful transition to civilian life for military veterans. Understanding the current state of veteran entrepreneurship, in particular, the type of challenges veterans face in starting and growing businesses is fundamental to fulfilling this responsibility. The US Small Business Administration’s Office of Veteran Business Development (OVBD) has partnered with the Federal Reserve Bank of New York to examine veteran business financing, which is critically tied to their performance and growth.
Of particular concern for policymakers is whether veterans have a more difficult time accessing capital than nonveteran business owners. In order to substantiate policy intervention on behalf of veteran entrepreneurs, it is necessary to size the market and understand the needs and challenges. While anecdotal evidence points to capital access challenges, systematic data collection has been limited. This paper first outlines the current literature on veteran entrepreneurship and then presents new small business credit data from the Federal Reserve Banks’ Small Business Credit Survey. The data, for the first time, provide substantial evidence that veteran-owned businesses face greater difficulty in accessing capital relative to nonveteran-owned businesses.
Analysis of States’ APR Caps
This National Consumer Law Center report examines the annual percentage rate (APR), including both interest and fees, allowed in each state and the District of Columbia for a $10,000 five-year loan. An APR cap is the single most effective step states can implement to deter abusive lending and ensure that families are not caught in a debt trap that’s nearly impossible to escape.
Credit Experiences of Minority-Owned Firms
Given the relationship between a small business’s access to financing and its outcomes, and given the growing share of minorities in the U.S. population, it is important that creditworthy firms and entrepreneurs, irrespective of race or ethnicity, are able to secure adequate financing to achieve growth and success. Data from the Federal Reserve System’s 2016 Small Business Credit Survey allow for a closer examination of the experiences of minority-owned small businesses in applying for and obtaining financing.