facilitate enforcement of fair lending laws and enable communities, governmental entities, and creditors to identify business and community development needs and opportunities of women owned, minority-owned, and small businesses. Teresa Garcia, Mission Economic Development Agency
Number of CRA reportable loans in 2014 down 60% from peak in 2007, dollar amount down by 37% Number of CRA reportable loans under $100,000 in 2014 dropped to 61% lower than 2007, dollar amount decreased 52% Woodstock Institute Patterns of Disparity Report January 2017
Woodstock Institute Patterns of Disparity Report January 2017
Between 2012-2014 businesses in low income census tracts compromise an average of 9.3% of all businesses But received only 4.7% of total amount of CRA reportable loans under $100,000 If had received loans in proportion to their share, would have received 687,600 more loans, totaling $8.8 billion more Woodstock Institute Patterns of Disparity Report January 2017
97.7% of all minority-owned and 98.3% of womenowned businesses were under $1M in annual revenues. 67% of smaller businesses (less than $1 million in revenue) obtained less than amount sought 45% of larger firms (more than $1 million in revenue), obtained less than amount sought Within credit risk categories, smaller revenue firms are less likely than larger firms to receive at least some of the financing they request Small Business Credit Survey, Federal Reserve April 2017 Key dimensions of the small business lending landscape, CFPB 2017
Eighty-six percent of credit applicants sought a loan or line of credit for their business 31% applied for a credit card Small Business Credit Survey, Federal Reserve April 2017
Credit card lending makes up at least 46.7% of market share in numbers of loans American Express 30% Chase Bank 10% Capital One 6.7% No information related to bank credit card lending In dollars, two of the large national banks reported 30% of CRA reportable lending was credit cards, one reported under 3% Credit Card Lending in dollar amounts is at least 17% of market share Small businesses are getting stuck with credit cards for loans and there is a high usage, but amounts are smaller Are banks offering a variety of small business lending products to meet need? Does the credit card usage reflect demand or supply? CRA Wiz 2015 Peer Small Business Data CRC 2015 Bank Survey
Online Lenders Applications completed within 30 minutes, decisions within hours Between 2010-2014, online small business financing transaction grew by 629% in California DBO report, APR High 74% dropped to 51% in 2015 Merchant Cash Advance Loans Average APR 94% Average monthly loan payment nearly double (178%) the net income available to owners Among the Latino borrowers in Opportunity Fund s sample, the average monthly payment was more than 400% of their take-home pay. Paula Tejada, owner of Chile Lindo Unaffordable and Unsustainable: The New Business Lending. Opportunity Fund, May 2016. SURVEY OF ONLINE CONSUMER AND SMALL BUSINESSFINANCING COMPANIES CALIFORNIA DEPARTMENT OF BUSINESS OVERSIGHT (DBO), April 2016
Small Business Credit Survey, Federal Reserve Bank of New York, April 2017
Small Business Credit Survey, Federal Reserve Bank of New York, April 2017
Women are half as likely as men to obtain business loans from banks In 2016 just 18% of SBA 7A loans and 17% of 504 loans went to women owned businesses Latino African American Asian Non Minority Personal Savings 55% 55% 62% 57% Personal Credit Card 9% 9% 8% 7% Bank Loan 4% 3% 7% 8% Business Credit Card 2% 2% 2% 2% None Used 28% 29% 19% 25% SBA Office of Advocacy July 2016
2016 SBA Data
California 2016 2% 0.49 13% 14% 44% WHITE ASIAN OR PACIFIC ISL UNDETERMINED LATINO BLACK AMERICAN INDIAN 26% 2016 SBA data
ECOA enforcement important for banks and non bank lenders UDAP should apply to non bank lenders Improve ECOA and general violation complaint processes for small business owners on CFPB complaint database Detailed, public, 1071 data. Ensure banks are making smaller loans to smaller sized businesses Banks should refer declined loans to CDFIs and community lenders who might make those loans Banks should support CDFIs, community lenders and TA providers through philanthropy Banks should participate in federal and state guarantee programs Consumer protections should apply to small businesses, who act as consumers in the marketplace