@CFED facebook.com/CFEDNews cfed.org/blog/inclusiveeconomy
@CFED facebook.com/CFEDNews cfed.org/blog/inclusiveeconomy
@CFED facebook.com/CFEDNews cfed.org/blog/inclusiveeconomy
@CFED facebook.com/CFEDNews cfed.org/blog/inclusiveeconomy
AL ALTER TERNA NATIVE TIVE SMALL BUSINESS LOAN =
• • • @CFED facebook.com/CFEDNews cfed.org/blog/inclusiveeconomy
@CFED facebook.com/CFEDNews cfed.org/blog/inclusiveeconomy
S MALL B USINESS L ENDING A NALYSIS • Small business loans made • number and amount by ranges • no data on applications or applicants • Business address data from HUD/USPS • Demographic data from FFIEC • median family income percentage • percent minority • Hispanic/Latino population • total population 12
CRA L OANS UNDER $100,000 13
D ISPARATE A CCESS TO L OANS 14
A CCESS TO L OANS UNDER $100,000 • Number down 9.5%, amount up 5.0%, 2001-2014 • ~529,000 fewer businesses received loans • Percent of businesses receiving loans nationally, by tract income, 2012-2014 • low-income – 20.6% (~1 in 5) • moderate-income – 27.9% • middle-income – 41.1% • upper-income – 61.1% (~ 3 in 5) 15
CDFI Model Alternative Small Business Lending Webinar Metta Smith
About Accion serving NM, AZ, CO, NV, TX As of April 2016: - $35MM in assets - $29MM in loans receivable - 2,037 active clients - 345 loans issued in 2016 for $6.2MM - 11% of loans issued are for more than $50,000 20
Funding Sources • CDFI Treasury Fund • Loans/Lines of Credit • LLC Investments • SBIC Investments • Grants/Donations 21
Products • The Presto Loan • MicroLoans • Small Business Loans • Commercial Real Estate Loans • SnapFund • SBA Community Advantage Loans 22
Underwriting Criteria • Minimum FICO score of 500 • Minimum Bankruptcy Index of 300 • In most cases require collateral • Considered a “Cash Flow” based lender • Will fund start ups, non profits, restaurants and business acquisitions • Will not fund businesses whose primary revenue stream is related to Marijuana, Tobacco, Alcohol, Pornography, Predatory Lending, etc. 23
Loan Details • Loans from $1,000 to $1,000,000 • Terms from 6 months to 84 months (up to 25 year amortization for CRE) • Rates range from 7% for our very largest loans to 22% for the loans with the highest risk. • No application fee; a Community Benefit Fee at closing ranging from 1.5% to 8.5% of loan balance • No Prepayment Penalties 24
Maxim Tires: An Accion Success Story Maxim Tires , in Denver, specializes in selling used tires, putting a necessity within reach of many families who cannot afford new tires. Owner Mario Valdez understands the financial challenges many of his customers are working to overcome. A former Border Patrol agent, Mario found himself in need of a new line of work following an injury. With previous experience in the tire industry, Mario bought his business from a family member three years ago and renamed it after his youngest son, Maximo. 25
www.Kiva.org/US jonny@kiva.org
1.2M 90 1.4M Borrowers Countries Lenders $850M 2.0M Total lent through Kiva Total loans funded 110 7 450 Employees Seconds between loans Volunteers
Kiva U.S. since 2011… 2,163 63 small businesses nesses support ported ed Of w which h over half were minority ty- owned d and half f women-ow owne ned $11,517, ,517,875 875 loaned ned in 47 states tes $0 of interes est and fees charged ged 80,000 000 lenders ders have e made e a loan 354,325 ,325 connecti nnections ons made e between een borrow ower ers and lenders ders 89% repay ayment ent rate
Antisocial Social underwriting underwriting Lending decisions are made based on Lending decisions are made based on financial data – the strength of a borrower’s social data – the strength of a borrower’s credit score, collateral and cashflows. character, or their standing in their community. Loans (and underwriting decisions) are made Loans (and underwriting decisions) are for the purpose of minimizing risk and made for the purpose of having a positive maximizing profit. social impact. Lending decisions are autocratically made Lending decisions are democratically made by a crowd of millions of people – by a single, centralized, objective and inflexible algorithm. each with their own subjective interests, passions and reasons for lending.
“I can't tell you how much I appreciate your help, and how much I am enjoying this process. Each time I receive an email saying someone donated I get some sort of excitement and happiness!! LOL! It is really rewarding and calming to see the numbers go down!! I very much appreciate being part of this family now, I know how much it helps because of my own experience to help someone with as low as 25 dollars, because it is not only the money but the trust you give to that person that gives it so much value, and the best part is that this help comes from people you possibly will never know!! Thanks to things like this I truly believe, that small and random acts of kindness at the time in remote places, can truly change the world. Thank you VERY MUCH for your TRUST that is something I would never be able to repay!!!”
www.Kiva.org/US jonny@kiva.org
LENDING CIRCLES: FUNDING THE DREAM
We are a nonprofit organization on a mission to create a fair financial marketplace for hardworking families. RESPECT MEET BUILD
LENDING CIRCLES
MEET ALICIA Alicia started her tamale business going door-to-door, selling 100 tamales per week. Lending Circles helped her buy a food cart, expand her team & increase sales to over 4,000 tamales per week. With an improved credit score, she secured a loan to lease a factory & become a tamale wholesaler.
PARTNER SPOTLIGHT 4 Lending Circ ircle les fo form rmed 25 parti rticip ipants enro nrolle led $7,800 in in ze zero ro-in interest t loans $315 ave verage loan amount
NETWORK APPROACH 50 PROVIDERS 17 STATES + DC
LENDINGCIRCLES.ORG
EXPANDING FINANCIAL INCLUSION 20 bi bilingual fi financial ed education modules 9 language op options for for loa oan doc ocuments
STAY IN TOUCH MOHAN KANUNGO, Director of of Pro rograms Website: LendingCircles.org Email: mohan@missionassetfund.org Twitter: @MAFpajarito Office: 3269 Mission St. San Francisco, CA 94110
Who is Lending Club? The leading lending technology platform Founded 2006. Based in San Francisco, CA $18 Billion in loans funded 4 th largest Internet IPO in US history Goal: Create a more Efficient, Transparent, and Customer- Friendly alternative to traditional banking. Louis Caditz-Peck, Small Business Lending 46
What’s Driving Online Small Business Lending Banks are not meeting business’ demand for credit. Commerce overall is moving online. Digital data is widely available, and used in underwriting. Technology is enabling lending at lower operating costs — making smaller loans cost effective. 1 Governor Lael Brainard , speech “ Community Banks, Small Business Credit, and Online Lending” 9/30/15. At Community Banking in the 21st Century, The Third Annual Community Banking Research and Policy Conference. Available at http://www.federalreserve.gov/newsevents/speech/brainard20150930a.htm
What’s Driving Online Small Business Lending Banks are not meeting business’ demand for credit. Commerce overall is moving online. Digital data is widely available, and used in underwriting. Technology is enabling lending at lower operating costs — making smaller loans cost effective. Federal Reserve Governor Lael Brainard: “ Much of the growth in online alternative lending has been supported by innovative uses of technology that allow lending platforms to: • Streamline and automate loan applications, • Expedite underwriting and quickly price risk, and • Provide… quick loan decisions and access to funds .” 1 1 Governor Lael Brainard , speech “ Community Banks, Small Business Credit, and Online Lending” 9/30/15. At Community Banking in the 21st Century, The Third Annual Community Banking Research and Policy Conference. Available at http://www.federalreserve.gov/newsevents/speech/brainard20150930a.htm
Small Business Lending Is Changing Fast… Bank lending is down Nonbank lending, some of it high-cost, is targeting the gap Business Financing of $150k or Less SBA Loans Estimated High-Cost Online Funding $14 Billions MCAs and $12 short-term $10 $8 loans have $6 surpassed $4 small SBA $2 loans $0 2010 2011 2012 2013 2014 2015 Sources: Online short- term estimates based on “The State of Small Business Lending” by former SBA Administrator Karen Mills, pub lished Harvard Business School 2014. SBA data annualized: https://www.sba.gov/sites/default/files/aboutsbaarticle/WebsiteReport_asof_06_20_2015.pdf 49
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