An August report, “Dis-Credited: Disparate Access to Credit for Businesses in the Chicago Six County Region,” by the Woodstock Institute, a nonprofit policy organization, has found that banks were statistically less likely to lend to businesses located in low-income and majority minority Census tracts between 2008 and 2012.
Mr. and Ms. Williams are grass-roots entrepreneurs in every sense of the word. And yet their landscaping business managed to flourish in a climate that, for many aspiring small businesses seeking critical loans, sometimes seems more like a desert.
Many nascent entrepreneurs need loans that are too small for major financial institutions to provide, a problem exacerbated by the lending standards that emerged after the Great Recession.
In a July 2014 article, Crain’s Chicago writes that there is a large gender gap in small business loans. The article examines the national trend of small business lending, but the statistics are just as staggering as those found in Chicago. According to the article, women own 30 percent of small businesses but receive 4.4 percent of conventional small business loans dollars.
“Businesses need affordable capital in order to grow, create jobs, and generate economic activity,” said Spencer Cowan, Vice President of Research at Woodstock Institute. “This research clearly shows that businesses in low-income and majority minority communities do not have the same opportunities to expand as businesses in high-income, majority white neighborhoods, potentially exacerbating the wealth gap and stifling entrepreneurship that could help rebuild distressed neighborhoods.”
Data from all regulated financial institutions shows the impact of the Great Recession on the availability of credit. Lending to businesses declined by 4.8 percent nationally between 2008 and 2011. The dollar volume of small loans to businesses declined even more sharply than lending to businesses generally, down about 14.6 percent nationally between 2008 and 2011.