Many entrepreneurs trying to jumpstart that next neighborhood brewery, coffee shop, or food truck in Colorado need financing to help turn their ideas into a reality. As the Opportunity Finance Network conference kicks off today in Denver, a new report identifies the Mile High City as an oasis in the larger terrain that is America’s small business lending market.
But the report also finds that Denver’s loan-friendly climate since the Great Recession coincided with a nationwide decline in small business lending. What can be done to turn the country’s underserved lending deserts into lending oases?
THE REPORT’S FINDINGS
The National Community Reinvestment Coalition report, “Small Business Lending Deserts and Oases” analyzed private sector and federally-supported lending trends in more than 3,200 counties between 2007 and 2012. While 61.6 percent of small businesses received private-sector loans in 2007, only 16.4 percent received private-sector loans in 2012.
When comparing counties in the top 20 percent and bottom 20 percent – the report’s clearest “oases” and “deserts,” – 21.3 percent of small businesses in the top quintile were granted loans, while only 7.5 percent of businesses in the bottom quintile of counties received loans.
“This analysis should serve as a wake-up call to the huge drop in lending small business owners have been facing since the recession, and the heightened challenges small business owners in certain geographic areas are facing in obtaining small business lending,” said NCRC President and CEO John Taylor.
ARE THE SMALLEST BUSINESSES THRIVING?
We were especially interested to understand how these trends played out for the nation’s smallest, small businesses and their champions – often times women, minorities, and immigrants who cannot access financing through the formal financial system. Through the WE Lend Initiative, Accion is partnering with Sam’s Club to increase access to capital for women entrepreneurs in lending deserts and oases across the country and strengthen SBA-recognized Women’s Business Centers.
According to the report, businesses earning less than $1 million in revenue received just 10 percent of all business loans made, as compared with 16 percent of all small businesses. The report also cites racial lending disparities, as well as gender lending disparities in federally supported small business lending: In 2012, roughly 9.3 Small Business Administration (SBA) 7(a) loans were issued per 10,000 women-owned businesses, in contrast to 24.7 SBA 7(a) loans per 10,000 male-owned small businesses.
OUR WORK IN COLORADO AND BEYOND
Look no further than the brewing industry in Colorado to understand the challenging financing needs of many entrepreneurs in the sector. Many of these start- up entrepreneurs need large loans – between $100,000 to $200,000 – to buy the equipment necessary to start their businesses, and Accion is where many turn when larger banks say no.
In Colorado, Accion lent more than $3 million to 243 businesses across the state, including Denver. As the leading nonprofit provider of small business coaching and capital, we’re doing everything we can to improve access to capital for very small businesses in lending oases and drive much-needed capital to areas with lower reported lending levels, including San Diego.
Come visit our table booth at the conference to learn more about our lending efforts across the country.