Access to Capital Challenges for Minority-Owned Small Businesses Explored
Small Business Loans
Small businesses owners, particularly women and minorities, face acute and unique challenges when it comes to getting a loan to help them grow and create new jobs.
The Consumer Financial Protection Bureau (CFPB) this week in Los Angeles held a public hearing to identify the financing needs of traditionally underserved small businesses.
“There’s a gap between the loan requirements of for-profit lenders and the characteristics of many minority-owned small businesses,” said Robert Villarreal, executive vice president for economic development for FE Small Business Finance, who testified at the CFPB hearing. “Issues such as credit score, financial documentation, smaller dollar requests all come into play when small business owners are considered for a loan, and often declined.”
Villarreal said what many small business entrepreneurs need is technical assistance, or business advice, often only offered by mission-based lenders. He said they need someone who will take the time to answer basic questions about credit eligibility. He also advocated for the implementation of Rule 1071 from the Dodd-Frank Act, which requires financial institutions to compile, maintain and report information about their applications for loans from small businesses, including those owned by women and minorities.
Based on publicly available data, there are 9.8 million businesses owned by women and 7.9 million businesses owned by minorities in the U.S.
The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the CFPB to collect data about small business lending to help identify needs and opportunities in the market and facilitate enforcement of fair lending laws. The goals of the CFPB inquiry are to determine (1) what defines a small business, (2) what institutions lend to small businesses and what products are offered, and (3) what types of business lending information are used by financial institutions
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