We work with small business owners who have a dream, but who don’t have big built-in networks or access to enormous sums of capital. For example, the fastest-growing group of Americans starting new ventures is African-American women. But you’d never know that based on where the money is going.
Sarah Kersten Studio in Berkeley has been manufacturing heirloom-quality ceramics for Bay Area consumers and restaurants for the past four years. Sales have increased steadily, as has their popularity with major San Francisco restaurants like Frances and Octavia. As a growing small business, owner Sarah was having trouble accessing traditional sources of capital to expand her inventory. Her company didn’t meet the guidelines of most mainstream lenders, so Sarah had to look for an alternative lender. Pacific Community Ventures was able to provide Sarah a loan with an affordable rate.
Sarah’s story is the story for thousands of California small businesses. Unlike Sarah, many small businesses in California are forced to turn to online predatory lenders when they have trouble accessing capital. For that reason, PCV supports a Small Business Borrower’s Bill of Rights, and encourages all of our fellow small business lenders to join in.
Small businesses employ half of California’s private sector workers, but far too many of those businesses are unable to access loans from traditional financial institutions because they are too young or too small. African American, Hispanic, Asian, and female small business borrowers in particular face difficult access-to-capital challenges and often lack the guidance to develop strong loan applications.
“The Federal Reserve’s research shows 39% of all small business loan requests are below $50,000. A third of entrepreneurs who apply for a bank loan are rejected; 54% among people of color,” says Darlene Rios Drapkin, Principal of Urban Transformation and a Contra Costa Small Business Development Center Advisor. “And women in general are turned down for loans 20% more often than men. Traditional financial institutions aren’t meeting that need, so unfortunately more and more small business owners are turning to online lenders with more often than not predatory rates.”
Small businesses are the majority of America’s businesses — and they create and maintain the lion’s share of America’s jobs. A generation ago, most small business owners got their funding from a local community bank — but now with a generation of bank consolidation having consumed America’s community banks and credit unions, small business owners are turning to a number of new options in a generally-unregulated wild west of online lending.
The way small businesses borrow money is being transformed. Innovators are providing faster and easier ways to borrow and increasing access to credit in communities that have historically been underserved. This transformation will achieve its potential only if it is built on transparency, fairness, and putting the rights of borrowers at the center of the lending process. To that end, we have identified the fundamental financing rights that we believe all small businesses deserve. These rights are not yet protected by law, in most cases. We encourage the entire small business financing industry to join us in upholding these rights.
Read the full bill: