We work with small businesses who have a dream, but who don't put on big built-in networks or access to enormous sums of capital. For example, the fastest-growing number 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 continues to be manufacturing heirloom-quality ceramics for Bay Area consumers and restaurants for the past 4 years. Sales have raised steadily, as has their popularity with major Bay area restaurants like Frances and Octavia. Like a growing small company, 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 search for an alternative lender. Pacific Community Ventures was able to provide Sarah a loan by having an affordable rate.
Sarah's story is the story for a large number of California small businesses. Unlike Sarah, many small businesses in California have to use online predatory lenders whether they have trouble accessing capital. For that reason, PCV supports a Small Business Borrower’s Bill of Rights, and encourages our fellow small business lenders to join in.
Small businesses employ 1 / 2 of California's private sector workers, but too many of these companies are unable to access loans from traditional financial institutions because they are too young or not big enough. Black, Hispanic, Asian, and feminine small business borrowers particularly face difficult access-to-capital challenges and frequently lack the guidance to build up strong loan requests.
“The Federal Reserve's studies have shown 39% of small company applications are below $50,000. A third of entrepreneurs who apply for a financial loan are rejected; 54% among people of color,” says Darlene Rios Drapkin, Principal of Urban Transformation along with 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 businesses are turning to online lenders with more often than not predatory rates.”
Small companies are nearly all America’s businesses — plus 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 — however with a generation of bank consolidation having consumed America’s community banks and credit unions, small businesses are embracing numerous new options in a generally-unregulated wild west of online lending.
The way smaller businesses take a loan is being transformed. Innovators are selling much easier ways to borrow and increasing use of credit in communities which have historically been underserved. This modification will achieve its potential only if it is built on transparency, fairness, and putting the rights of borrowers in the center from the lending process. To that end, we have identified the fundamental financing rights that people believe all small businesses deserve. These rights aren't yet protected by law, generally. We let the entire small company financing industry to become listed on us in upholding these rights.
Read the entire bill:
