Small Business Lending

Small businesses create jobs, help families build wealth, and support economic development. Woodstock Institute works to ensure that all small business owners have equal opportunity to access sustainable credit.

This is the cover sheet for the fact sheet, it contains a table with various loan terms.
July 12, 2016

This Fact Sheet examines the terms of loans from major online lenders to small businesses. This analysis revealed that non-bank “fintech” loans to small businesses lack transparency regarding costs and terms, have effective interest rates up to over 350%, and include junk fees averaging $795 per loan. These loans, which resemble payday loans and the toxic subprime mortgage loans that led to the Great Recession, are made without regard to small business borrowers’ ability to repay and often trap borrowers in debt.

April 25, 2016
Presented by Dory Rand and Spencer Cowan at an Accion Chicago forum.
April 25, 2016

by Bruce Rushton

A bill to regulate online lenders that target small businesses with loans that can carry more than 100-percent annual interest rates is moving, albeit slowly, through the Illinois General Assembly.

Woodstock Institute Theory of Change graphic
April 20, 2016

In this first part of our Theory of Change series of blog posts and images, Woodstock President Dory Rand explains the ways in which Woodstock Institute is working to achieve our mission of creating a just financial system in which lower-wealth people and communities, and people and communities of color, can achieve economic security and community prosperity. In this series, our research and policy staff will discuss the strategies we use to effect positive, lasting financial systems change. 

This is an image of the Illinois State Capitol.
April 7, 2016

This week was the most active week in Springfield so far this year.  Friday, April 8 is the deadline for bills to pass out of committee.  For Woodstock and our legislative priorities, the week was mostly successful.

Title Slide
April 7, 2016
Presented by Dory Rand at the 2016 National Community Reinvestment Coalition conference in Washington, DC.
Woodstock’s Dory Rand, President, Mary Fran Riley of Accion and Brayden McCarthy of Fundera participate in a Small Business Lending Panel on Capitol Hill
February 4, 2016

As I look at the current landscape in search of barriers to economic security and community prosperity and for opportunities to create effective solutions to those problems, I am excited about the year ahead and about using Woodstock Institute’s applied research, policy analysis, and coalition-building skills to reduce inequality and to increase equitable lending and investments in under served low- and moderate-income (LMI) areas and communities of color, help people and communities build and preserve wealth; and improve access to safe and affordable financial products, services, and systems.

Woodstock will continue to work at local, state, and national levels in 2016 in partnership with existing and new allies. While we will continue to provide extensive regional and Illinois data and technical assistance through our data portal and TA program, we will also use some of the lessons learned from our local data analysis and advocacy efforts to influence developments in other states and at the federal level. Here are some of the highlights of our 2016 policy agenda:

Business owner at Jumping Bean Cafe
January 29, 2016

Several years ago, Woodstock joined with other consumer advocates to pass legislation to protect consumers from short-term predatory loans.  The Payday Loan Reform Act became law in 2005, and reforms to the Consumer Installment Loan Act became law in 2011.  Among other positive changes, those laws placed caps on the amount of interest that lenders can charge.  But now, predatory lenders are creeping into the area of lending to small businesses.  A report published by Woodstock in August 2014 entitled Discredited: Disparate Access to Credit for Businesses in the Chicago Six County Region reveals that lending by traditional banks is insufficient to meet the demand for small business loans, particularly for businesses in lower-income areas and for businesses in communities of color.  Non-bank, “alternative” lenders, which are largely unregulated, are striving to meet this unmet demand.  These alternative lenders, which provide high-cost loans with interest rates as high as 200 percent are not even required to disclose the Annual Percentage Rate (APR) on their loans, which makes it difficult for borrowers to know how much their loan costs, which, in turn, makes it difficult to engage in comparison shopping.

January 25, 2016
Testimony of Spencer Cowan before the Senate Financial Institutions Committee. In this testimony Cowan discussed the lack of access to capital for many small businesses in Illinois and the prevalence of online-predatory lenders.
January 25, 2016
Presented by Spencer Cowan at the Illinois Senate Hearing on small business and and impact of predatory lending.
January 4, 2016

By Peter Rudegeair, Emily Glazer, and Ruth Simon

J.P. Morgan Chase & Co. spent about $8 billion this year on technology. But when it came to developing a new online loan for small business, the bank turned to an unlikely outsider.

December 10, 2015

2015 was a big year for Woodstock Institute and allies working to expand opportunities for workers to save for retirement and to receive unbiased investment advice. Please take action on two retirement issues described below. 

December 9, 2015

Over the past year, Woodstock has expanded the work it has done to promote greater access to safe and affordable credit for small businesses, building on our 2014 report, Discredited: Disparate Access to Credit for Businesses in the Chicago Six County Region.  That report examined lending by large banks to businesses in lower-income neighborhoods and communities of color, specifically small loans that are most likely to go to locally-owned, neighborhood businesses that provide jobs to local residents.  The analysis of lending patterns showed that businesses in those neighborhoods were much less likely to have received loans from large banks than businesses in more affluent, predominantly white neighborhoods.

September 9, 2015

Years ago, as a young married person contemplating starting a family and saving for my children’s college education, I engaged for the first time with a financial planning firm. I learned the hard way the difference between an advisor who earns commissions based on sales of insurance and investment products, and an advisor who works for fees only on a fiduciary basis and does not sell products or earn commissions (such as a fee-only Certified Financial Planner). My initial planner recommended that I invest in a particular 529 college savings plan, without telling me that the recommend plan paid the highest commissions, rather than in a 529 plan with lower costs and better opportunities to grow savings. While I eventually switched my college investments to a lower-cost 529 plan, many people remain stuck in less advantageous college investments because they received advice from advisors who are not acting under a fiduciary standard, which requires that the advisor put the investor’s interests first, not the interests of lining the advisor’s own pockets. Fiduciary standards are needed to protect consumers and help families save more for college.

August 20, 2015

A growing number of financial products and services are becoming available online. From mortgages to student loans to small business loans, consumers and business owners are able to borrow with a few strokes of the keyboard. While the increased accessibility of products and services may have some benefits for consumers, a number of unregulated financial products may actually do more harm than good. In order to further assess the situation, the United States Department of the Treasury has sent out a request for information about online lending, specifically focusing on small business lending and consumer lending. The data that the Treasury Department receives will help it determine what kind of regulation may be needed to protect borrowers in the online marketplace.

June 25, 2015

We had a vibrant discussion in Chicago recently on barriers facing women trying to access mortgage and small business credit and ways to support women’s efforts to build wealth. Woodstock Institute and JPMorgan Chase hosted a forum for about one hundred participants from the nonprofit, banking, and government sectors on June 19. Melissa Bean, Midwest Chair for Chase, and I welcomed the group and kicked off the event.

March 23, 2015

This Women’s History Month, we at Woodstock Institute are reflecting on how women are still at a disadvantage in the areas of income and wealth and what can be done to address that disparity. One of the common ways in which people build assets is by purchasing a home. Woodstock Institute’s research has shown that women are at a distinct disadvantage in obtaining mortgage credit. The Unequal Opportunity report found that applications from women were less likely than applications from men to be originated and that female-headed joint applications were less likely than male-headed joint applications to be approved. We are completing follow-up research which includes a look into whether certain neighborhoods experience more gender disparities in access to mortgage credit than others and suggestions for policy and practice solutions to expand women’s access to mortgage credit. 

Tags: women
January 23, 2015
Small businesses in low-income, majority minority neighborhoods in the Chicago area were less likely to receive loans between 2008 and 2012, according to a report from the Woodstock Institute, recipient of the MacArthur Award for Creative and Effective Institutions. The report, which examines...
November 19, 2014

By Natalie Moore

In underserved communities, entrepreneurs have a hard time finding capital to start and grow their businesses.

But several programs in Chicago are helping these micro-business owners secure loans and be financially successful.

September 5, 2014

By Michael Romain

The more low-income and the more minority a Census tract is, the harder it is for businesses within that tract to access credit, report says

September 2, 2014
In 2010, Jimmie and Tiffany Williams received a small loan from Accion Chicago to expand Just Us Lawn Care Inc., a South Side landscaping and snow-removal business. Since then the company has blossomed, adding jobs and income that reverberate through their neighborhood economy.
August 29, 2014
Local economies suffer when neighborhood businesses can't get loans to grow, hire new workers and generate economic activity.
August 29, 2014

Small businesses in low-income, majority minority neighborhood in the Chicago area were less likely to receive loans between 2008 and 2012, according to a new report by the Woodstock Institute.

August 28, 2014

When I read “Dis-Credited,” Woodstock Institute’s recent study on racial and income disparities in business lending, I saw in black and white what I have also experienced in flesh and blood.

August 22, 2014

Woodstock Institute’s most recent report highlights disparities in access to small business loans in the Chicago region. Between 2008 and 2012, businesses in wealthier or predominantly white Census tracts were more likely to receive loans or credit from major financial institutions than businesses in low-income and majority-minority tracts. This creates a substantial business credit gap and allows for little room for businesses in low-income and majority-minority communities to grow. Essentially, marginalized communities become even more marginalized through unbalanced bank lending. However, there is another demographic that also struggles to get the small business loans they need: women.

Press Clipping • Business Loans (WBEZ)
August 22, 2014
WBEZ's Claudia Morell speaks with Woodstock Institute Vice President, Spencer Cowan, about the disparate access to bank lending for Chicago area businesses. “There may be business owners in those neighborhoods who don’t think that they will qualify for bank financing and don’t even apply.” Cowan says these neighborhoods need capital the most. “They can hire, they can pay people who live in the neighborhood to work and those people then have resources to buy and to increase economic activity, to invest, to become homeowners and to build wealth.”
August 20, 2014
This fact sheet looks at the disparate access to business loans for Chicago area businesses. The numbers show that businesses in wealthier and predominantly white tracts were more likely to receive loans than businesses in low- to moderate-income or majority-minority tracts. In response to these disparities, Woodstock Institute recommends that local governments should encourage banks to lend to more low- to moderate-income areas by enacting strong responsible banking ordinances, bank examiners should more stringently analyze lending practices under the Community Reinvestment Act, and more.
August 20, 2014

By Sarah Needleman

7:20 EDT - Amid a slow recovery in US small-business lending, a report out today suggests that small firms in low-income communities are struggling the most. Between 2008 and 2012, small businesses in such neighborhoods in the Chicago metro area received $817M less than their share of overall business credit, reports Woodstock Institute, a nonprofit that analyzed data from Federal Financial Institutions Examination Council, US Census and Department of Housing and Urban Development. "Just like the housing recovery, it's not even," says the study's author, Spencer Cowan. "If we have areas that are not growing, those will slow down the recovery for the entire nation." (sarah.needleman@wsj.com; @saraheneedleman)

August 19, 2014

Lack of access to credit could limit economic opportunity in disinvested communities

CHICAGO—There are significant disparities with respect to both race and neighborhood income in access to credit for businesses in the Chicago six county region, a new report from Woodstock Institute found. From 2008 to 2012, the business loan gap (that is, the difference between the total amount of loans made and proportional distribution of loans) in majority minority communities was estimated to be nearly $1.5 billion, and the gap in low-income communities exceeded an estimated $817 million.

Read the report

August 19, 2014

This report examines geographic patterns of access to bank capital for businesses in the Chicago six county region, with a focus on smaller loans and other types of credit, amounts under $1 million, that are more likely to benefit smaller, local businesses that create economic opportunity within neighborhoods. For small neighborhood businesses to grow, they need to be able to access capital, and one common source of capital for small businesses are loans, lines of credit, and business credit cards (collectively, “small loans”) issued by banks and other financial institutions.

 

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