This report is the third in a series of reports based on the 2016 Small Business Credit Survey (SBCS), a national collaboration of the Community Development Offices of the 12 Federal Reserve Banks. As a key financial regulator and economic policymaker, the Federal Reserve System plays an important role in ensuring fair access to credit and promoting economic growth for the well-being of all Americans. Small businesses are an important component of economic success and strong communities; they are responsible for 48% of private sector employees nationwide, are important drivers of local and regional economic growth, and are an important source of household wealth. A healthy small business environment depends on an array of factors, not least of which is the ability to access funds for starting up, scaling up, or maintaining operations. However, as a growing number of studies document, access to funds—whether debt, equity, or personal resources— can vary across race and ethnicity even when business owners are similar in other respects such as business performance and credit risk.
Resource Category: Microlending
Disparities in Small Business Lending
A study examining disparities in small business lending conducted by the Woodstock Institute found that Fresno minority businesses are losing out in capital and turning to merchant cash advances. (Yikes!) Access Capital, a CAMEO member, is trying to refinance some of those loans.
Developing Solutions to Minority Financing Challenges
Starting a new firm or growing an established business requires capital, but Black and Hispanic businesses are reported to have higher barriers to capital access. The challenges are well documented and many solutions have been proposed, but to achieve change, we need to move ideas into action. The federal government actually has a lot of programs that can help. Between the Small Business Administration’s (SBA’s) Community Advantage Loan Program, Treasury’s Community Development Financial Institutions (CDFI) Fund), Commerce’s Minority Business Development Agency (MBDA), and the Department of Agriculture’s Office of Small and Disadvantaged Business Utilization(OSDBU), there is potential to mobilize resources that drive job creation and economic growth, especially in minority communities throughout the country. We need to leverage these resources, as well as develop and execute new solutions.
Small Business Owners Struggle For Credit
The California Reinvestment Coalition released Small Business Owners Struggle to Access Affordable Credit, a new report focused on the challenges small business owners and entrepreneurs face when trying to get a loan to start, maintain, or grow their businesses.
2016 Employer Firms Credit Survey
The 2016 SBCS, which was fielded in Q3 and Q4 2016, yielded 10,303 responses from employer firms in 50 states and the District of Columbia. The report findings provide an in-depth look at small business performance and debt at the end of 2016.
Expanding Small Loan Programs
During 2016, Opportunity Finance Network (OFN) convened an Employer-Based Small Dollar Loan Knowledge Network (Knowledge Network) of nine diverse mission-driven lenders offering employer-based small dollar loan products. OFN managed the Knowledge Network with the support of The Prudential Foundation and the valuable insights of two Knowledge Partners, Center for Financial Services Innovation and the National Federation of Community Development Credit Unions. Through monthly conversations including online and in-person meetings, the Knowledge Network participants shared strategies and learned about common challenges. This paper details learnings from the Knowledge Network’s discussions, organized in six areas: Marketing, Outreach, and Employer Engagement; Customer Experience; Technology; Financial Counseling; Impact and Outcomes; and Partnerships.
2015 Nonemployer Firms Credit Survey
Small nonemployer businesses—those with no employees other than the firms’ owners—make up nearly 80% of all U.S. firms in number. Yet, little is known about the performance or the financing needs and decisions of these 23 million businesses. The few sources that provide insight into small business credit conditions do not distinguish the experiences of nonemployers from small employer firms, which may differ significantly.
Small Business Finance FAQ
The Finance FAQ outlines the borrowing and lending universe for startups and existing small businesses, provides demographic information, and touches on important trends in the amount and modes of finance.
The New Business Lending
Opportunity Fund released a very important research report, “Unaffordable and Unsustainable: The New Business Lending on Main Street.” Until now, we have been relying on stories to explain what’s happening with online lending. Now we’ve got some data on the loans and cash advances being offered to small businesses by short-term, high-cost alternative lenders. Cliff notes on findings: 94% interest rates; average payment is 1.78x income -YIKES.
2015 Employer Firms Credit Survey
Seven Federal Reserve Banks released Small Business Credit Survey: Report on Employer Firms. The three main findings: financing success improved in 2015; businesses most satisfied with small bank lending; and online lenders are popular—but they have lowest borrower satisfaction levels.