Senate Democrats want rules in place to collect and make publicly available data on small-business loans.
If you’re a small-business owner, especially one based in a low-income or underserved community, this data could help you find financing.
The initiative was unveiled last week, when 19 Democratic senators urged the Consumer Financial Protection Bureau to accelerate drafting guidelines for collecting and disclosing small-business lending data in accordance with the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
The data would provide a clearer sense of whether access to small business loans and financing has improved in underserved communities, particularly those hardest hit by the 2008 financial crash.
“Access to capital is often limited in underserved and underrepresented communities — the same communities that disproportionately endure financial hardship and lack broader access to opportunities,” the senators, including Cory Booker of New Jersey, Elizabeth Warren of Massachusetts, Dianne Feinstein of California and Al Franken of Minnesota, said in a letter to CFPB Director Richard Cordray.
“While access to capital has improved in these areas, it is difficult to gauge whether lending practices have broadened to incorporate businesses that operate and employ in these underrepresented communities.”
Since 2012, the federal agency has indicated that drafting rules for small-business loans data is a “long-term action item,” the letter noted.
The legislators think it should become a priority. While small-business owners have more funding options today than before the recession, many lenders have been criticized for offering loans with extremely high interest rates.
Why access to small-business loans data is important
More data on small-business loans and lending would help policymakers, lenders and advocates in traditionally underserved communities devise more effective strategies to get small-business owners easy access to capital, the letter said.
The U.S. Small Business Administration publishes a “Weekly Lending Report” with data on government-backed loans to different demographic groups, including women and ethnic and racial minorities.
But “current data collection efforts are fragmentary and provide an incomplete picture of lending in the small-business marketplace,” the senators said.
To be sure, the small-business loans market has expanded, marked by the growth of alternative lenders, such as Lending Circle and Kabbage. But “every major survey of small-business owners seems to point to credit access being a problem during this recovery,” according to Karen Gordon Mills, a former SBA administrator who studied the state of the small-business loans market in a Harvard Business School research paper.
That makes the CFPB plan to collect small-business loans data important, she argues in the paper: “When the regulations are finalized and the data is collected, this is likely to become the seminal data set on small-business credit conditions.”
To get more information about funding options and compare them for your small business, visit NerdWallet’s best business loans page. For free, personalized answers to questions about financing your business, visit the Small Business section of NerdWallet’s Ask an Advisor page.
Image via iStock.