20 stories for 20 years: Unlocking access to responsible capital

One of the biggest barriers to entrepreneurship is capital. It’s often so hard to get, in fact, that many early-stage small business owners resort to borrowing from friends and family, or risking their life savings to support their dreams. This is especially true in under-resourced communities, and it happens because traditional banks are reluctant to make small business loans unless those loans are both large and government-backed. It’s also true that many aspiring small business owners simply lack a strong relationship with traditional banks. Given this landscape, it’s no surprise that Small Business Majority’s research has shown that only around one-third of entrepreneurs who sought funding received it. Of those who did secure a loan or grant, less than one-third said they received sufficient funding.

With capital hard to come by from traditional banks, many small business owners turn to Google for help. A search for small business lenders yields plenty of companies offering quick cash – and lots of it. What isn’t always clear, however, is that some online lenders are offering funds that come with enormous interest rates disguised as fees. Often, this is perfectly legal: The federal government and most states don’t require that annual percentage rates (APR) be clearly disclosed in commercial lending agreements. As a result, loans that seem like a lifeline for small businesses can turn into an anchor with interest rates as high as 75% or more. 

In addition to the deceptively high interest rates, one of the most insidious aspects of predatory loans is that business owners who are victimized by bad-faith lenders tend to also feel shame. As a result, many entrepreneurs are unwilling to publicly share their personal stories. Fortunately, Small Business Majority has had the privilege to work with brave small business owners like Chrishon Lampley, who is also a member of Small Business Majority’s Illinois Small Business Council. Chrishon has regularly shared her predatory lending story over the years because she wants to make sure others like her don’t have a similar experience.  

Given the unfavorable small business loan landscape, a core component of Small Business Majority’s work has been the advancement of responsible lending. This includes being a founding member and currently serving on the board of the Responsible Business Lending Coalition (RBLC), which represents more than 1,000 small business groups, lenders, and non-profits combating the rise of irresponsible small business lending. Notably, RBLC developed the Small Business Borrowers' Bill of Rights, an industry standard intended to promote responsible business lending by ensuring borrowers have the right to transparent pricing and terms, safe products, responsible underwriting, equal treatment, inclusive credit access and fair collection practices. Through our work with RBLC and elsewhere, Small Business Majority has also provided resources that can help small business owners identify and avoid predatory loans.

But predatory lending isn’t just the result of irresponsible lenders – it’s also driven by a lack of safeguards under the law. To help entrepreneurs like Chrishon, Small Business Majority has long supported policies that strengthen protections for small business borrowers and promote a fairer lending landscape. We’ve shared anecdotes from predatory lending victims to push for stronger federal laws, as well as improved regulations in states like California and New York. 

We’ve also worked to expand the federal Truth in Lending Act to cover commercial loans, testified before lawmakers and regulators in support of accurate APR disclosure rules in places like Illinois, and advocated for programs like the State Small Business Credit Initiative to help address the capital crunch. Additionally, we’ve continued to elevate the voices of small business owners through letters to the editor and by securing coverage in digital publications, radio and other media outlets.

While access to capital remains a challenge for many small businesses today, the collective efforts of advocacy groups and organizations like the Responsible Business Lending Coalition make it easier for America’s smallest firms to grow.