Creating Jobs in Our Neighborhoods!Josh Silver, Vice President of Research and Policy, NCRCApril 20, 2012
Creating Jobs in Our Neighborhoods!Power and Limitations of Current Small Business Data!• Case Study – Comprehensive Study on Access to Credit and Capitalfor the Appalachian Regional Commission! !• Power of Data – Can Identify Geographical Areas Served and Gaps!!• Limitations – Limited Demographic Data on Small Businesses!!• Limitations on Demand Analysis for Loans or Ability of SmallBusinesses to Qualify for Loans!!• Dodd-Frank Requirements to Enhance the Data!!• Objective – Increase Access to Responsible Credit by HoldingFinancial Institutions Accountable!!
Creating Jobs in Our Neighborhoods!Objectives of Study of ARC Study!• Measure access to credit and capital for small businesses. Compare US toAppalachia and categories of counties and sub-regions within Appalachia• Supply of loans and investments by banks, CDFIs, equity funds, RLFs, andother institutions• CRA small business lending, SBA 7a, SBA 504, microloan program, CDFIlending• Distribution of banks, credit unions, CDFI and other institutions in Appalachia• Explore relationships between access to credit and distribution of lenders,concentration levels, branches• Spatial autocorrelation, mapping, county index, demand analysis!
2007 2010 0% 20% 40% 60% 80% 61.6% United States 19.5% 50.3% Appalachian Region 16.2% 55.5% Northern Appalachia 19.4% 46.2% North Central Appalachia 15.8% 33.3% Central Appalachia 11.1% 50.9% South Central Appalachia 15.7% 50.0% Southern Appalachia 14.8%
Creating Jobs in Our Neighborhoods!Credit Card Small Business Lending!• Identify credit card small business loan specialists – large institutionstypically, but do data limitations impede analysis?• Hypothesis: more credit card lending in disadvantaged counties withless creditworthy small businesses and less access overall to loans.• Is credit card lending correlated (neg. or pos.) with overall smallbusiness lending?• Anomalies occur: large market share in attainment counties• Market share increased in distressed counties !!
Creating Jobs in Our Neighborhoods!SBA Lending!• 7a and 504 not targeting disadvantaged counties• Microloan program is better at targeting, but smaller than7a• Access for minorities for 7a is better than access forfemales – females not being targeted in disadvantagedcounties• Important: Publicly available data by race/ethnicity andgender for SBA lending but not for CRA lending!!
Creating Jobs in Our Neighborhoods!Current Small Business Loan Data!• Disclosed as part of the CRA regulations!• For aggregate, disclosure by census tract!• For individual lenders, disclosure by income category oftract!• Dollar size of loans in categories!• Two revenue size categories – above and below $1 millionin revenues!• Revenue size not disclosed if revenue of small businessnot used in decision!• That s about it…useful but quite limited!!
Creating Jobs in Our Neighborhoods!Section 1071 – Small Business LoanCollection – Dodd Frank!The purpose of this section is to facilitate enforcement of fairlending laws and enable communities, governmentalentities, and creditors to identify business and communitydevelopment needs and opportunities of women-owned,minority-owned, and small businesses.!!
Creating Jobs in our Neighborhoods!Dodd-Frank Section 1071 - !• Open ended on which institutions required toreport, can include non-banks!• CFPB will have discretion to decide whichinstitutions will have exemption from reporting!• Big deal in Appalachia – mid size banks ($250 to$1 billion), but they are just voluntary reporters…don t know yet how much of the loan data is frommid-size banks. Our previous report for ARC in2007 found signiﬁcant role for mid-size banksbefore their data reporting requirement was deleted.!!
Creating Jobs in Our Neighborhoods! Dodd-Frank Section 1071 – Small Business Loan Data!• Demographics – Race and gender of the small businessowner, revenue size of business; census tract!• Type and purpose of loan – Possibilities are credit card,origination, reﬁnance, govt. guaranteed!• Action taken on application; amount of credit limit approved!• Data availability – must retained for three years and madeavailable in form prescribed by the CFPB!• Discretion for CFPB – to add data elements which fulﬁllpurposes of Sec1071 or delete elements to protect privacyof borrowers!!!
Creating Jobs in Our Neighborhoods!Enhancements to Small Business Data Critical!• Assess if credit needs are being met for various demographiccategories of small businesses & identify missed business opportunities!• Better enforce fair lending laws!• Enhance studies like ARC that seek to identify if private sector andpublic sector programs are meeting needs and direct actors toaddressing gaps in access!!• Next generation of small business data – include information likecreditworthiness like new HMDA data; collateral like LTV for new HMDAdata?!!
THANK YOU!!To follow up with the speaker:!Josh Silver, Vice President of Research and Policy, NCRC!202-464-2708 or firstname.lastname@example.org!Presentations will be available at www.ncrc.org/conference by !April 30, 2012!