Small Business Access to Capital

Dear Consumer Financial Protection Bureau,

Small business owners often have difficulty accessing traditional bank loans.  Regularly, small business owners receive solicitations from risky, unregulated online lenders with extortionist rates and terms.  The CFPB data collection under Section 1071 of Dodd-Frank is critical to making sure small business owners like me have a fair shot at succeeding. 

Small businesses play a crucial role in local and national economic growth, and are important engines of job creation in our communities.  Despite this important role we play, we face challenges accessing capital to start and expand our businesses:

  • Since the financial crisis, small business bank loans have decreased by 20 percent, while loans to larger businesses have increased over the same period. Nearly half of all small business owners experience problems accessing credit.

  • The situation is worse for women- and minority-owned businesses.  

    • Businesses located in minority neighborhoods are less than half as likely to receive loans compared to businesses in white neighborhoods.

    • Only 28 percent of minority borrowers are approved for loans, compared to 67 percent of non-minority borrowers. 

    • 30 percent of Black business owners report receiving less in loans than requested, compared to 12 percent of White business owners.

  • Small business owners are forced to turn to predatory lenders for needed financial capital.  Predatory lenders provide loans with high interest rates, onerous terms, and poor customer service.

    • Fintech loans (loans given out through non-bank financial technology, i.e. mobile payments, money transfers, loan fundraising, etc.) have effective interest rates that range from 100 percent to 367 percent, and include “junk” fees averaging $795 per loan.  

    • The average fintech borrower pays an APR of 94 percent, with rates reaching as high as 358 percent. Hispanic borrowers face an average monthly payment of more than 400 percent of take home pay.

In order to ensure equity in capital access, no lending institution should be exempt from the data collection requirement, including commercial banks, community banks, credit unions, online banks, and non-bank lenders like fintech companies and merchant cash advances.  

Robust data collection by banks and other lending institutions is critical to understanding the prevalence and extent of redlining.  Financial institutions that are not complying with fair lending laws must be held accountable to the fullest extent of law.

I urge decisive and prompt implementation of Section 1071, so that small business owners have a fair shot at securing the capital we need to succeed.



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