Community Development Financial Institution (CDFI) loan funds face a common capitalization challenge as they seek to grow—they must raise net assets to enable the additional debt financing needed to support an expanding portfolio. Among CDFIs that focus on microlending—making small dollar loans of up to $50,000 to small businesses—the financial challenges are even greater, as the revenue earned on these small-dollar, relatively short-term loans typically does not cover the cost to originate and service them (Klein & Okagaki, 2018, 12-14). Thus, CDFI microlenders must also raise grant (subsidy) dollars to support the increase in their lending costs as their portfolio grows.
Since 1980, the number of commercial banks has dropped from 14,400 to 4,600. Given the decrease in commercial banking options, it is important to understand the long-term trends of banking industry dynamics by size of bank, as well as the impact of small business lending on bank growth and small business success. This report finds a decline in bank dynamism with falling new bank entry rates and increasing exit rates for small banks. Additionally, the authors found that small business loans are positively associated with the growth of small banks and small business success. Read “Effects of Small Loans on Bank and Small Business Growth” to learn more.
This report uses the latest publicly available lending data from banks to examine changes in small business credit for June 2017 through June 2019. The data used was collected prior to the 2020 COVID-19 pandemic and provides a precrisis benchmark on the state of small business lending.
Since March 2020, businesses in the U.S. have been struggling to continue operations in the face of a global pandemic. The COVID-19 pandemic has resulted in a recession because of the widespread closures of non-essential businesses enacted to reduce the spread of the virus. Even as things begin to reopen, people are less likely to go out due to possible health risks. In response, Congress passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act which created the Paycheck Protection Program (PPP). The PPP is a lending program that provides money, in a potential grant format, to small businesses to help them weather the economic effects of the pandemic. The majority of the loan needs to be allocated for employee salaries and then the remainder can be used for other business expenses like rent and loan payments. The purpose of this study was to determine whether the disparities in small business lending we have detected prior to the COVID-19 pandemic continued with implementation of the PPP program.
To determine the initial effectiveness of government relief efforts, Gusto analyzed data from nearly 27,000 of our small business customers who reported receiving PPP loans and compared it to platform data from our 100,000-plus small business customers nationwide. The report below shows that PPP aid has helped to provide stabilization from the initial free fall in March ‘20, with strong increases in hiring and rehiring beginning in the second half of April ‘20.
Since its founding in 2007, Tricolor has empowered customers by providing access to affordable financing on high quality, certified vehicles in order to enhance the quality of their lives and ultimately help them to build a better future. For more than a decade, Tricolor has successfully scored no file and thin file Hispanics, as evidenced by five well-received ABS securitizations.
This report provides an analysis of how lending changed overall and in rural vs. urban areas before, during, and after the financial crisis of 2008-2010. The analysis shows that rural firms have poorer access to bank credit than their urban counterparts in terms of both the amount and number of loans and that this situation has deteriorated, rather than improved during the post-crisis years of 2011-2016.
CDFI Friendly America: A White Paper Introducing the CDFI Friendly Strategy for Smaller Cities and Towns By Mark A. Pinsky & Adina Abramowitz First posted March 2020 The purpose of this White Paper is to introduce a new way for America’s small cities and towns to attract flexible, affordable financing to address gaps in markets
The San Francisco District office has released new data on SBA guaranteed lending programs, accompanied with a user-friendly interface for visualizing and customizing the data to local areas. Create custom reports with lists of businesses that have benefited from SBA programs, find the active lenders in your neighborhood, and see trends going back to 1990.
U.S. banks play an integral role as credit suppliers to small businesses. Small businesses comprise of nearly all employer firms in the economy and employ 47.3 percent of the private sector workforce (SBA Advocacy, 2019). The existence and performance of these vibrant businesses depend on how banks and other financial intermediaries are responding to their credit needs. This report uses publicly available data on U.S. banks to analyze the patterns in small business lending.