Background:Small businesses create two out of every three new jobs in this country and are widely acknowledged to be the engine of economic growth.
New Challenges for Small Business Owners and Lending: Since the mortgage meltdown, bank financing for small businesses has shrunk dramatically- especially smaller small businesses, and for small businesses owned by women and people of color. Instead of making actual small business loans, banks are also pushing small business owners towards credit cards. As an example, read CRC's recent comment letter on Chase's CRA exam, highlighting that the majority of their small business lending in California was actually via credit cards.
We are also concerned about issues created by "innovative" fintech lenders who are entering the small business loan void created by banks not lending. Opportunity Fund, a Community Development Financial Institution (CDFI) recently documented that some fintech lenders are orginating predatory loans that are sinking small businesses.
Recent bank partnerships with fintech also raises a hosts of concerns- for example, JP Morgan's partnership with OnDeck (whose average APR for a small business loan ranged from 8.9 to 98.4%, according to the Wall Street Journal).
The California Reinvestment Coalition (CRC) sees the support and growth of small businesses in low-income communities and communities of color as a critical focus of its work. These businesses, often minority- and women-owned, encounter much greater difficulties receiving conventional loans from banks than larger businesses or those located in wealthy communities. And yet, they are even more important in low-income communities and communities of color because of the important job creating and asset creating role small businesses can play.
To read more about CRC's latest small business report, please see our December 2013 press release: New Report Finds 60% Drop in Small Business Lending
In this work, CRC has focused on three particular issues.
You can read CRC's previous reports on small business lending here:
December 2010: Small Business Access to Credit:The Little Engine that Could