Chicago Small Businesses Need Better Lending Options

12/13/2017 05:24 pm ET

This post was co-authored by Chicago City Treasurer Kurt A. Summers, Jr. and Brad McConnell, CEO of Accion serving Illinois & Northwest Indiana.

It’s difficult for most small businesses to obtain a loan. Just ask Margo Strotter, owner of Ain’t She Sweet Cafe, which now has two locations–one in Bronzeville and one in Beverly.

When Margo was starting out she was her own bank, but she knew that wasn’t a long-term solution to her capital needs so she eventually sought help from traditional lenders. Unfortunately, those institutions were either unwilling or unable to help Margo.

Then she had a breakthrough. While attending an event at the Urban League, Margo was put in touch with Accion, a lender that is committed to helping small businesses, particularly those in underserved communities. She ended up receiving two loans from Accion over the years: The first helped her get her business off the ground, the second came 10 years later and allowed her to expand to a second location.

In Chicagoland, there are a lot of Margos. In fact, the area is home to more than 230,000 small firms, making it the country’s third-largest small business hub. And yet, as big banks focus on big businesses, it has become harder and harder for Chicago’s small business owners and entrepreneurs to secure reasonable loans from responsible lenders.

Indeed, as more small businesses require more capital—to launch, expand, scale, and hire—new “alternative” lenders have cropped up, online and elsewhere, to meet this demand. The trouble is that such alternative lenders are not regulated like banks. Some are hardly regulated at all. And at a time when small business owners in Chicago—often women, minorities, and veterans—face structural challenges accessing new capital, this unregulated alternative lending space leaves them particularly vulnerable to predatory practices.

Given these concerns, we are excited to launch SimpleGrowth— a new online lending tool that connects trusted Chicagoland lending partners to neighborhood businesses. SimpleGrowth’s lenders, which include Accion, Local Initiatives Support Corporation (LISC) Small Business and the Women’s Business Development Center, are committed to fair lending practices and to growing small businesses across all of Chicago’s 77 neighborhoods. These nonprofit financial organizations offer responsible underwriting, fair collection, transparent terms and pricing, and inclusive credit access.

Once small business owners complete SimpleGrowth’s free and easy application, they are matched with loans and lenders tailored to their borrowing needs. If they don’t qualify for a loan today, SimpleGrowth connects owners with business assistance centers throughout Chicago that offer business, planning and support services to help improve the chance of securing a future loan.

A simple tool like SimpleGrowth should prove particularly useful to founders and entrepreneurs in our underserved communities. While the number of minority-owned businesses in Cook County increased by 30 percent between 2007-2012, we know that women and minorities have a tougher time accessing credit than their white counterparts. The National Community Reinvestment Coalition found that black-owned businesses received just 2.3 percent of Small Business Administration loans in 2013—down 8.7 percent from 2008. Women don’t fare much better. A poll last summer found that just 30 percent of women-owned companies were able to get a bank loan during the previous three months, compared to half of all owners surveyed.

In many of our neighborhoods, small business owners aspiring to revitalize their communities or just hoping to launch a local coffee shop have the most trouble securing responsible credit. We believe that new tools like SimpleGrowth are a big part of the solution to this problem. When small business owners are connected with responsible lenders, better resources and support services, capital flows more freely and more fairly, meaning businesses can grow and communities can thrive. When that happens, all of Chicago shares in that success.

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