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Small Business Lending Landscape

Changes to the Small Business Lending Landscape & Referral Fees

Small businesses are the backbone of California’s economy, creating 82% of new net jobs in our state. In order to grow, these businesses need access to capital to purchase supplies and equipment, market their products and hire workers. Despite these businesses’ importance to California’s economic recovery, bank lending to small businesses remains at historic lows. Bank lending to California small businesses is still at only one-third the number of loans made in 2007. Loans to women-owned and minority-owned businesses have fallen by even greater levels.

One proven strategy for serving hard to reach communities is the use of modest referral fees. Referral fees serve as an important incentive for a local business owner to share information on available, high-quality financing with other business owners in their family, neighborhood, industry and/or ethnic community. By modifying the California Finance Lenders Law to allow business lenders to pay referral fees to their clients and partners (for successful business loan applications of $5,000 and above), it is possible to harness existing social capital to bring desperately needed financial capital to low income and minority communities.

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About the Presenter

Gwendy Donaker Brown photoGwendy Donaker Brown is Director of Policy and New Initiatives at Opportunity Fund, California’s largest microfinance organization. In her role, Gwendy advocates for federal, state and local policies that help small business owners, college students and working families advance their economic well-being. Gwendy was first drawn to development work when she served as a Fulbright Scholar with the Andean Development Corporation (CAF) in Caracas, Venezuela. She holds a BA in Economics & Public Policy from Pomona College and an MPA in Nonprofit Management from New York University. Gwendy is originally from Berkeley, CA.