The Support Center released a report today, “Small Business Lending in North Carolina: The Increasing Role of Community Lenders,” that examines small business lending patterns in the state by banks, Community Development Credit Unions (CDCUs), Community Development Financial Institutions (CDFIs), and credit unions. CDFIs are institutions designated by the U.S. Department of Treasury to promote revitalization and community development in underserved and low-wealth communities.
The study highlights the important role that community lenders play in getting capital to underserved communities across the state. It illustrates that while the large banks focus their lending on upper-income areas of the state, CDFIs focus on lower-income areas.
Specifically, the report found that:
• Banks invest 250 times more, in terms of small business lending, in upper income census tracts than in lower income tracts
• By contrast, CDFIs invest 40 percent more, in terms of small business lending, in lower income census tracts than in upper income tracts
• CDFIs invest 26 percent of their lending resources in low- and moderate-income census tracts, compared to 16 percent by large banks
• 72 percent of the loans made by CDFIs are under $100,000, while 87 percent are under $1 million
As we know, large banks have been pulling back from small business lending, while at the same time community-based lenders have been stepping in to try to fill the lending gap. These financial institutions serve low-income communities and provide loans to the small businesses that, in many cases, have been turned away from mainstream banks. However, these lenders need additional public and private support in order to keep small businesses afloat and keep many of our struggling communities from falling even further behind.
The Support Center hopes that this report will further the dialogue on small business development and the role that community- based financial institutions and organizations play in local economic development.
The full report can be downloaded here.