With an increasing number of women and minority entrepreneurs launching small businesses, the marketplace is becoming more diverse. In fact, the number of women-owned small businesses is up 58% from 2007. And the National Association of Women Business Owners reports that as of 2017 women-owned businesses employed almost 9 million people and generated $1.7 trillion in sales. Unfortunately, small business lending hasn’t caught up with the diversity trend.
The Federal Reserve Bank of Cleveland reports that a mere 40% of minority-owned businesses were approved for the loan amount they requested, as compared to 68% of white-owned businesses. Because of dismal loan approval rates, Black-, Latinx-, and Asian-owned businesses are more likely to skip traditional funding sources and turn to alternative lenders. That also means they’re more likely to overpay for, or not acquire, the financing they need to grow their businesses
Small businesses create two out of three new jobs in the US private sector. Impeding small business growth takes a toll on our communities. Conversely, widening access to small business funding is an investment in our communities and the economy at large.
How can traditional banks bridge this diversity gap to offer broader access to capital for all small businesses? Mirador CEO and Co-Founder Trevor Dryer suggests three things traditional banks can do to diversify small business lending. Read his Forbes article now.
An advocate for small business lending and fintech, Dryer is a contributing member of Forbes Finance Council. He writes about improving access to capital, small business lending and developing trends in the banking industry. Peruse his contributor page to view his latest articles.