Just $1 of every $23 in conventional small business loans goes to a woman-owned business. According to the U.S. Small Business Administration minority small business owners are disproportionately denied credit when they apply for it, regardless of credit scores, income, or profits. What’s more small businesses, especially those that get turned down for traditional loans, are easy prey for predatory lenders. Minority- and woman-owned businesses in low-income communities are at the highest risk. They’re getting slapped with 125% interest rates and impossible repayment timelines, conditions that often result in bankruptcy.
Last year, the Opportunity Finance Network drew set out to help small businesses identify and avoid predatory lending. OFN has been pushing community development financial institutions (CDFIs) as the alternative to predatory lenders. OFN also won an ally in Sam’s Club. With the support of a $3.6 million grant from Sam’s Club Giving Program’s Small Business Economic Mobility Initiative, OFN will lead CDFIs in an upcoming effort to inform, educate, and protect small business owners who are most vulnerable to irresponsible lending practices.
CDFIs are private financial institutions dedicated to delivering responsible, affordable lending to help low-income, low-wealth, and disadvantaged people and communities join the economic mainstream. These organizations are on the front lines of our communities providing small business owners with the access to capital they need to thrive and continue contributing to our communities. OFN is leading the charge to spark a national dialogue about small businesses, economic opportunity, and economic growth.
“Small businesses are some of our country’s most critical economic drivers,” OFN president and CEO Mark Pinsky said in a statement. “However, lack of access to capital and other resources make women business owners and entrepreneurs of color more susceptible to rogue lenders. Providing responsible credit to these business owners is a commitment to secure futures for small businesses, and the future of our country. Irresponsible credit is a job killer.”
Through 2013 OFN’s network reportedly originated $34 billion in financing in urban, rural, and Native American communities. This financing has helped to create or maintain more than 720,000 jobs, start or expand nearly 120,000 businesses and microenterprises, and support the development or rehabilitation of nearly 1.5 million housing units and 9,500 community facility projects, notes the OFN.
“Millions of small business owners are valued members of Sam’s Club and we’re always seeking solutions to lessen their top concern: increasingly limited time and resources,” President and CEO of Sam’s Club, Rosalind Brewer added in statement. In our shared pursuit to help small business owners grow and thrive, we are proud to support the CDFI industry’s initiative to educate and inform small business owners about responsible financing options and how to avoid falling prey to abusive lenders.”