Small Business Owners Struggle For Credit

Displacement, Discrimination, and Determination: Small Business Owners Struggle to Access Affordable Credit

California Reinvestment Coalition

First published September 2017

Everyone says they love small businesses. After all, they create jobs, help business owners and their employees provide for their families, pay taxes, and are the bedrocks of local communities. Politicians and regulators often act in the name of small businesses. But are they always acting in the interest of small businesses?

The catalyst for this survey was the Request for Information (RFI) released by the Consumer Financial Protection Bureau (CFPB) at a May 10, 2017 field hearing held in Los Angeles. The field hearing included a panel discussion where two CRC members and two CRC allies participated as panelists, as well as a hearing where several CRC members and their clients testified. Through this RFI, the CFPB is seeking additional feedback from stakeholders about current challenges faced by small businesses, as well as potential challenges to lenders from data collection efforts.

For years, CRC members urged Congress and federal banking regulators to require the collection of small business lending data in order to better understand the needs of small business owners, to highlight and thereby reduce discrimination against women and minority small business owners, and to ensure financial institutions, regulators, and all stakeholders are working to ensure equal access to small business credit. Under §1071 of the Dodd-Frank Act reform bill, Congress responded to advocate and small business concerns by authorizing the CFPB to write a rule to require small business lenders to collect and disclose this data. The CFPB’s RFI was a first step in the Bureau’s process to write a rule to require this data collection.

In light of the CFPB moving forward with the §1071 data collection effort, this report provides a snapshot into the small business lending outlook in California, including what unique barriers minority-owned and women-owned small businesses face.

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