What's the problem?
Urban Institute April 2024 study and 2022 study showing a $3 billion gap between what Fresno County small business owners are asking for and receiving in terms of loans. Fresno entrepreneurs need greater access to capital, both in a separate December survey.
A new analysis of America's 100 largest cities and counties finds that Fresno ranks near the bottom when it comes to lending to small businesses.
An April report on investment patterns released by the Urban Institute found Fresno County and the City of Fresno ranked second and third from the bottom in lending to small businesses, respectively, compared to other large cities and counties nationwide. Researchers found that the ranking was
The report also notes racial and geographic disparities in small business lending, with investment concentrated in the north and east of the city, favoring census tracts where less than 20% of the population is Hispanic. It was shown that
These findings speak to local experts who say there is a disconnect between the amount of capital Fresno small businesses requested and received, which is estimated to be in the billions of dollars. It wasn't that surprising. .
“Here in Fresno, just needing a few dollars doesn't make up the gap,” said Tate Hill, president of Central Valley mission lender Access Plus Capital. “No, there's quite a gap.”
Hill's organization helped produce a December 2022 study that estimated the unmet loan demand from small businesses in Fresno County at $3 billion. This gap was even more pronounced for businesses owned by people of color.
Local leaders say barriers to accessing capital stem from a variety of factors, from a lack of community banks in South Fresno to a lack of business coaching resources in languages other than English. It is said that it will be done.
“Although the Urban Institute study is alarming, many local minority-owned businesses are struggling to secure Paycheck Protection Program loans during the COVID-19 pandemic due to lack of access to traditional financial institutions. This is not surprising, as we have seen this situation where people were struggling with the situation,” Will said. Oliver, president of the Fresno County Economic Development Corporation, said in an email.
Despite these barriers, experts praised Fresno's network of Mission Lenders for spearheading efforts to help underserved populations access small business loans. .
“This should be treated as an achievement,” said Noah McDaniel, a research analyst at the Urban Institute and one of the study's co-authors.
“In many places around the country, especially in Fresno, we find that these investments are often directed to communities in need,” he added. Investors and funding sources “in areas with high poverty that have not received much attention from the mainstream.” ”
How the Urban Institute created a snapshot of small business lending in Fresno
The Urban Institute, a public policy think tank in Washington, D.C., analyzed more than a decade of census data from 2010 to 2022 to create the new report.
McDaniel said researchers used multiple sources to create the small business rankings, including data from the U.S. Small Business Administration's 7(a) and 504 loan programs, as well as regional It also includes data from reports required by some banks under the Reinvestment Act.
The study does not include small business loans made through “fintech lenders,” which refers to financial companies that operate online, McDaniel added.
Why Fresno entrepreneurs have trouble securing small business loans
Hill said a recurring barrier to capital access that he has observed through his work at Access Plus Capital is that people don't have an existing relationship with their local bank.
“Having access to bankers allows you to develop relationships with banks, which makes a difference,” he said.
This problem is more pronounced in some areas of Fresno than others.
“If you look at south Fresno, outside of downtown itself, there are only a handful of banks,” he added.
Fresno also needs more technical assistance. This means you need business coaching and support with things like developing a business plan and preparing to apply for a small business loan.
Fresno SBA District Office Director Dawn Golik said that assistance should be available in multiple languages.
“We do events and outreach in Spanish, which I think is very important in the 15-county San Joaquin Valley and Central Coast region that we serve. “It’s an area with a very large speaking population,” she said.
Mission lenders and community development financial institutions like Access Plus Capital offer unique services to serve customers who have difficulty accessing capital, such as low credit score requirements.
Other CDFIs serving Fresno-area clients include Fresno Area Hispanic Foundation, CDC Small Business Finance, and Accion Opportunity Fund.
However, Hill emphasized that a small number of mission lenders alone cannot close the $3 billion shortfall in small business lending.
A “one-size-fits-all” approach also won't work, he added. Because while some entrepreneurs may need $50,000, others may need hundreds of thousands of dollars to buy a building or open a second store. be.
“There has to be this ecosystem of support,” he said.
“No single entity or bank makes all the loans. It has to be a combination of entities.”
