2016 Community Meeting Results: Increasing Lending for Minority-Owned Businesses
On April 21, 2016 MicroEnterprise Collaborative convened a group of local leaders serving the small business community in the Inland Empire and considered the topic of increasing lending to minority-owned businesses. The group, consisting of representatives from financial institutions, small business lenders, and service providers, nonprofits, ethnic chambers of commerce, and government agencies, identified a series of challenges and solutions.
Some of the challenges included the following:
- Need to be educated on how to prepare to apply for a loan, lending limitations, and have the patience to overcome lending hurdles
- Don’t have cash flow, business plan, established credit, or verifiable income to justify the loan
Bankers and Lenders
- Can’t fund those who haven’t started a business, outside the service area, or aren’t the type of business they fund
- Have to turn down those who are currently past due with their other bills
- Can’t get guarantees for business lending when borrower has recent merchant advance activity or bad credit
The group identified some aspects that are working well:
- 40 percent of SBA loans are made to minority business owners
- Microlenders can look at the whole business and the owner’s character and help them build credit for larger loans
- The Small Business Development Center (SBDC) can help borrowers see what they are trying to achieve and focus on borrowing needs in a more realistic way
- Banks are partnering with and referring microlenders so borrowers will come back as customers
Participants came up with the following list of ideas, many of which we are already implementing.
- What vehicles will help banks (local branches) connect with nonprofits? Possibly develop a turn-down letter that includes a list of resources. MicroEnterprise Collaborative has a website with a list of resources for small business owners.
- Those who attended this meeting will get a list of attendees with whom to follow up.
- Connect with those who represent African-American and Hispanic communities. Business associations and ethnic chambers have training events and could partner with banks and nonprofits.
- Create a matrix of lenders so all know the products that each offers and the lending “sweet spot.” Vincent McCoy of the Inland Empire SBDC offered to draft a matrix for everyone to complete.
- How can bank executives get information about small business development and lending resources to all business bankers? Improved internal communication.
- SBA offers a quarterly roundtable. The June/July roundtable could feature mission-based lenders in a forum for SBA Bankers.
- Bankers could work directly with graduates of nonprofit business training programs.
- SBA has a newsletter and could share what was learned from the meeting.
- MicroEnterprise Collaborative could produce an “op-ed” about the importance of small business development.