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Barriers to Women’s Entrepreneurship

Barriers-to-Women's-Entrepreneurship21st Century Barriers to Women’s Entrepreneurship
Majority Report of the U.S. Senate Committee on Small Business and Entrepreneurship
Maria Cantwell, Chairwoman

Published 23 July 2014
Key findings from the report include:

Women entrepreneurs still face challenges getting fair access to capital. Only 4 percent of the total dollar value of all small business loans goes to women entrepreneurs. The report proposes expanding microloans and makes SBA’s Intermediary Loan Program permanent to provide more capital to women entrepreneurs.

Women entrepreneurs still face challenges getting equal access to federal contracts. The U.S. Government has never met its goal of awarding 5 percent of federal contracts to women-owned business. If they did, women-owned businesses would have access to marketplace opportunities worth at least $4 billion each year. The report proposes changing federal law giving women-owned businesses the opportunity to win sole source federal contracts.

Women entrepreneurs still face challenges getting relevant business training and counseling. Although Women Business Centers are in nearly all 50 states and they successfully provide specialized counseling and training to women business owners, these centers have not been re-authorized since the 1990s and funding has remained flat for the same time period. The report proposes reauthorizing and funding the centers to provide adequate training and business counseling to women entrepreneurs, especially low income women.

Read the report.

The report was the focus of a Senate hearing also held on July 23, 2014 – Empowering Women Entrepreneurs.

Women’s Economic Priorities

Women's-Economic-PrioritiesWomen’s Economic Priorities
U.S. Women’s Chamber of Commerce

Published July 2014

Women are an important force in America who have, for too long, been undervalued and underrepresented in political leadership and policy making.

Our multi-decade march into the American workforce, business ownership, household leadership and consumer spending has elevated women into true leadership of the American economy. And now, we are also The Majority Vote.

However, even with our sizeable contributions to and influence on the American economy, we recognize there is much left to do to support women’s economic opportunities, independence, security, values and family well-being.

The purpose of this report is to highlight the contributions of women to America, outline our current economic condition and state clearly the types of federal budget and policies that are vital to support Women’s Economic Priorities.

The new role for women’s economic and political leadership has begun as we focus or influence, detail specifically our contributions to America, our views and needs and strongly assert our influence through aligning our votes with those who support us. We call upon America’s political leaders to answer our call.

We are students, workers, mothers, business owners, retirees, consumers and The Majority Vote.

We are the New American Leadership.

(read more)

Growth of Microlending: Disruption, Adoption

This newsletter is chock-a-block with articles, resources, technology, success stories, interviews, and big picture ideas on all Lending Academy features. This edition revolves around the disruptive changes that are popping up on a regular basis and providing challenges and opportunities for our sector.

In this Issue…

  • State of Microlending, June 18 Meeting with CDFIs
  • News: Alternative Lenders Abound
  • MMS Update: Working Solutions Adoption and Growth
  • Dealing With Disruption:  Revenue-based Lenders
  • Best Practices:  Small Dollar Credit Tool
  • Success Story: Pedro Zerpa, Fusion Peruvian Grill
  • Training Opportunities

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State of Microlending, CDFI Meeting June 18

Wells Fargo, CAMEO and number of California CDFIs gathered in Sacramento on June 18th for a dynamic conversation about the state of microlending in the Golden State. Hosted by Wells Fargo’s Community Development Manager Tim Rios and co-sponsored by CAMEO, the goal was to identify challenges and solutions to expanding CDFI lending activity.  CAMEO and the Wells Fargo Community Development team were there to ask questions, listen and gain understanding of the needs of California’s CDFI community.

News

Technology: MMS Update -

Disruption Necessitates Change

Working Solutions understood early that the onslaught of new online lenders meant that they’d need to do something to compete.  So they joined CAMEO’s Microlending Management System (MMS) last year and are on track to double their number of deals this year.

Susan Brown talked to the organization’s executive director, Emily Gasner, and reports that Working Solutions gets a gold star in adopting MMS, but there were some bumps in the road that they had to overcome.

To learn more about how MMS can help make you more competitive with new online players, contact Susan Brown!

CAMEO thanks Rabobank for understanding that microlenders face challenges and competition from new industry players.  Rabobank supported us in the rollout of our MMS program.

Dealing with Disruption: Revenue-based Lending

The combination of online technology and investors who seek higher returns has created a flood of online business lending companies.  Navigating the space is challenging, even for an experienced borrower.  Rates, loan structures, fees, terms, etc can be hard to discern from the websites.  To that end, we will try to keep members up-to-date with current trends.  CAMEO wants to provide you – our business development and training professionals – with this information so you can help your clients determine which funding opportunities are most appropriate.

This month Shufina took a look at revenue-based lenders – those lenders whose repayment structure depends on revenues and receipts – one subset of small-capital, short-term lending that takes careful analysis to understand.

Best Practices:  Small Dollar Capital

The Center for Financial Services Innovation published a new guide – The Compass Guide to Small Dollar Credit.

  CFSI convened a network of expert advisors to develop a set of guidelines and best practices for high-quality small-dollar credit as part of their Compass Principles program.  The Compass Principles are aspirational guidelines to assure quality innovation and execution in financial services – services that enable people to transact, borrow, save and plan in ways that are beneficial to the consumer and profitable for industry.

Even though these guidelines are for consumer credit, the recommendations apply to small-dollar business credit.  The guide can be used as a framework for assessing your product and as a tool for training your staff and clients.

Success Story: Pedro Zerpa, Fusion Peruvian Grill

Pedro Zerpa ran his restaurant, Fusion Peruvian Grill, for three years, when he realized that he could increase his bottom line by adding a bar. He obtained the liquor license, but needed money to build out a bar area. Due to some past credit problems, Pedro was not eligible for a bank loan. He had his loan check in hand nine days after Working Solutions’ MMS loan system approved him.

Training Opportunities: 10,000 Small Businesses Financing Initiative

microbusiness trainingOFN and Goldman Sachs have committed to helping mission-driven small business lenders grow to better serve small businesses by launching the Goldman Sachs 10,000 Small Businesses Financing Initiative. This program kicks off with three identical workshops offered by OFN across the country, starting in late July.

The curriculum combines innovative approaches to marketing, culture, technology, operations, and leadership with elements of the Goldman Sachs 10,000 Small Businesses program for entrepreneurs adapted for small business lenders.  We here they might waiting-list only.

CAMEO’s Individualized Learning Program for Trainings and Professional Development can be used to partially defray trainings, workshops and events that help develop leadership and improve operations of our member organizations.  Learn more on how to access this member benefit as well as other training opportunities.

Revenue-based Lending

written By Shufina English

The combination of online technology and investors who seek higher returns has created a flood of online business lending companies.  Where there once was  a handful, there now are dozens, hundreds maybe.  Navigating the space is challenging, even for an experienced borrower. Rates, loan structures, fees, terms, etc can be hard to discern from the websites. CAMEO want to make sure that you – our business development and training professionals – keep up with this proliferation and help your clients determine which funding opportunities is most appropriate. To that end, we will try to keep members up-to-date with current trends.

For our first look into the this very vast arena, we look at a subset of business lenders whose loans are based on revenues and receipts. They offer small-capital, short-term loans.

Today, we look a four such lenders, including CAMEO member Opportunity Fund.  And while there may be other lenders, the same methodology can be used to analyze them. The chart below shows how much money it would cost a business owner to borrow funds from these lenders.  For comparison, we assume a $10,000 business loan for 12 months, and the borrower pays the average fees.

When reviewing the costs of short-term funding, we mostly talk about fees, not interest rates. The inconsistent terms can be confusing, even deceptive in some cases. But nevertheless, for our borrowers protection, we need to calculate the actual amount that the borrower will need to pay back over the time of the loan and need to do so in annualized terms, so that borrowers and their business counselors can compare it to the business’ margins, which is an annual calculation. Without that apples-to-apples comparison, a business owner can’t make an informed and productive borrowing choice. Borrowing at a annual rate that exceeds a business’ margins, will sink a business and rob it of its profits.

In the case of both On Deck Capital and Kabbage, a typical borrower can expect to pay back the principal (amount borrowed) + 15% of the amount borrowed. Based on these numbers, borrowing $10,000 will cost $11,500. However, the interest rate is not 15%. In fact, the effective annual interest on these loans can be up to 60% depending on terms!

The inconsistent terms can be confusing, even deceptive in some cases. But nevertheless, for our borrowers protection, we need to calculate the cost of capital (whatever its called) in annualized terms, so that borrowers and their business counselors can compare it to the business’ margins — which is an annual calculation. Without that apples-to-apples comparison, a business owner can’t make an informed and productive borrowing choice. Borrowing at a annual rate that exceeds a business’ margins, will sink a business and rob it of its profits.
The difference between the amount paid back and the effective annual interest rate is primarily due to two factors.

  • The period for repayment in this example is six months, and not a year.
  • The borrower is paying back the principal throughout the term of the loan / merchant cash advance.

In other words, if you average out the amount owed during the life of loan it’s about half of the original amount taken. Problems arise for borrowers who do not effectively predict their receivable cash flow because the penalties for insufficient funds accumulate daily and are added to the principle.

Analysis

Kabbage is acceptable for the 1 or 2 person eBay, Amazon, or Etsy merchant, who has a CLEAR understanding of their cash flow and sales cycle, and ideally will qualify for a lower interest rate. Although Kabbage’s fees are higher than the others, they are approximately half the cost of a traditional merchant cash advance, and can be considered for the online business owner who needs cash immediately for a business growth opportunity.

Opportunity Fund’s Easy Pay is best short-term loan provider for small businesses in this category.  Opportunity Fund’s EasyPay product is appropriate for brick and mortar businesses and businesses that have trouble getting loans from traditional banks. A loan from Opportunity Fund is approximately half the cost of any national competitor, and approximately a quarter the cost of a traditional merchant cash advance.  Business owners will realize a lower cost of funds by taking a longer payment plan.

Paypal Working Capital offers the cheapest source of funds to small businesses.  However, the amount of available capital is tiny and requires the client receive lots of payments via Paypal.  The maximum amount one can borrow is 8% of annual Paypal collections.  For example, if the client does $15,000 in revenues per month or $180,000 per year through Paypal, the maximum amount available to borrow would be $14,400  ($180,000 x .08).

 

On Deck Capital Kabbage Paypal Working Capital Opportunity Fund
(Easy Pay)
Type of Business Online and Offline Online merchants that collect via PayPal or sell through eBay, Amazon, or Etsy Online merchants that collect via PayPal Offline
Value of loan $5,000-$250,000 (typically $30,000-$35,000) $500-$50,000 $1,000-$20,000; capping at a maximum of 8% of annual PayPal sales $5,000-$100,000
Length of Loan 3 to 18 months (typically, 6) 6 months 3 to 11 months, depending on the plan 12-48 months with no prepayment penalty
Origination Fee / Fee Deducted From Funds 2% None None  5%
Cost of Funds Typically 15% of the amount borrowed for a 6 month loan 8% – 24% of the amount being borrowed 3%-10% of the amount borrowed; the shorter repayment term, the lower the rate 8.5% – 15%
Collection Process Deduct fixed amount from bank account on a daily basis 6 monthly payments with the first two being a greater amount A fixed percentage from 10% – 30% of funds deposited into your PayPal account A fixed percentage of credit and debit sales, no more than 10% of overall sales
Credit Building Opportunity Yes.  You build your credit score. No No Yes.  You build your credit score.
Cost of Funds for $10,000 loan for 12 months  $3,460 $3,200 $1,300 $1,760
Notes Assumes 2 six- month loans @ 15% with 2% fee Assumes 2 six-month loans @ 16% (average between 8-24%) Assumes 1 eleven-month loan at 10% and 1 one-month loan at 3% Assumes 1 twelve-month loan @ 12% (average between 8.5 – 15%)

Reflections on CAMEO’s 20th Anniversary

Gwendy Donaker Brown of Opportunity Fund looks back at our 20th Anniversary Celebration, and teases apart some of the themes of the day:

As a lifelong Californian, I always take special pride in meeting people from the far flung corners of our state who are hard at work building a strong local economy. Two of the seemingly contradictory things I learned at the event were the importance of staying centered and focused, even while changing with the times.

It is a challenge to simultaneously stay focused on your community (however you define it) and be nimble enough to refine what you do to as circumstances evolve. Perhaps the most important thing is to separate what is simply noise from the relevant and important trends that impact your community.

(read more)

State of Microlending in California

Wells Fargo, CAMEO and a number of member CDFIs gathered in Sacramento on June 18th for a dynamic conversation about the state of small business lending. Hosted by Wells Fargo’s Community Development Manager Tim Rios, and co-hosted by CAMEO, the goal was to identify challenges and solutions to expanding CDFI lending activity. CAMEO and the Wells Fargo Community Development team were there to ask questions, listen and gain understanding of the needs of California’s CDFI community.

a cool fifty thousandTim opened the meeting by asking “How is your CDFI doing and what are your most pronounced challenges and needs?”

The overall answer was, “We’re doing well, loan volumes are increasing, but could really use some additional resources to grow.”

The group specifically cited the need for equity capitalization to improve leverage. “We need strong balance sheets to borrow against” was the refrain. There is also a need for funding for operations and improved technology infrastructure. There continues to be a shortage of sources for loan loss reserves, which results in fewer loans made. Well-structured debt capital, i.e. larger EQ2s, is also needed, but requires CDFIs to have more assets on their books. Foundations that could provide loan guarantees for small business lending have not stepped forward since Fresno Regional Foundation facilitated a million dollar EQ2 with Wells Fargo. Geri Yang agreed to explore this potential resource with the California Philanthropy Roundtable

The group would like better collaboration with TA providers, to increase capacity to screen for loan eligibility and coach clients through the loan process. Opportunity Fund is sponsoring a bill that would allow CDFIs to pay referral fees, which CAMEO will be promoting in the coming year.

All the CDFIs stated they work hard to create close ties to their branch loan officers, and would like to see referrals from banks institutionalized in bank operations. Although bank referrals have been an issue for a long time, only Union Bank seems to have successfully achieved this. VEDC reported that 60% of their borrowers are referred by banks and 50% of these referrals get loans.

Many referenced the potential benefits and pitfalls of the new wave of online lenders, and some have seen borrowers who need to be refinanced out of poorly-structured online debt. Online lenders are entering the micro loan space because of a gap in products. There is not enough capital for micro lending, plus borrowers are looking for faster turn-around. CAMEO plans to address this issue, and build upon the initial analysis provided by Opportunity Fund and other organizations.

Regarding the close-out of CEDLI, CDFIs expressed concern that the CEDLI capital is no longer available. Because Wells Fargo served as the agent bank for CEDLI, it was suggested that WFB work to direct the millions of dollars of ongoing loan repayments to their CDFI partners. Claudia and Marc Nemanic agreed to explore this with Tim Rios. It was generally agreed that the manner of closing out CEDLI did not reflect well on Wells.

Tim and his team agreed that as next steps they would address the themes and gaps expressed during this meeting.

The participating CDFIs were: Emily Gasner, Working Solutions; Roberto Barragan, Valley Economic Development Corporation; Kerry Doi and Namoch Sokhom, PACE; Gwyneth Galbraith, Opportunity Fund; Salam Nalia, Fresno CDFI; Debbie Raven, Valley Small Business; Debra DeBondt, Opening Doors; Marsha Bailey, Women’s Economic Ventures; Scott Lewis, OBDC; Marc Nemanic, 3Core.

Growing and Evolving with MMS

Thanks to Susan Brown for this article.

WorkingSolutionsWorking Solutions (WS), based in San Francisco and serving the nine Bay Area counties, joined CAMEO’s Microlending Management System (MMS) last year and put their first deal through the system about eight months ago. Since then, their loan volume has grown significantly. In the year prior to using MMS, WS closed 50 deals. They are on track to double the number of deals this year, about 18 months of being fully on-board the program.

Working Solutions gets a gold star in adopting MMS, but there were some bumps in the road that they had to overcome.

“We had evolved our former loan process over many years. We liked it and we were used to it,” said Emily Gasner, WS Executive Director. “It’s not easy at first to change your process. MMS gave us a push to grow, shift and improve our systems.”

There were several elements to the change.

Integrating Software. While it doesn’t take long to learn the MMS software, it does take time to integrate it into your process.  When staff first touch a deal, they naturally use the old process and tack on MMS at some point in the middle.  It takes time for staff to let go of the old process and start the deal using MMS. Until then, the staff used both MMS and the legacy process. Under these circumstances, staff wonder why they are doing this extra work.   WS leadership led the way, initiating conversations to eliminate the duplication and streamline using MMS.

Risk assessment. WS had historically used an interview assessment process for screening. MMS offers an automated risk assessment process, called Auto Review. It took time getting used to automating a process that was done previously by staff members. Now WS staff start with the risk assessment as the starting point after receiving an application.

Underwriting criteria. MMS is built on an underwriting grid that differed from WS’ legacy process. At first, a different take on the deals was jarring as WS staff were skilled underwriters. Again, with communication and leadership, MMS staff began to learn more about and accept MMS underwriting criteria.

Underwriting process and communications. “We were used to jumping into our own underwriting assessment as soon as we had an application,” said Agnes Cheung, WS Director of Business Lending. “It took time for us to get used to handing it over to the MMS underwriting team, rather than do it ourselves.” WS is now in the process of honing communications with the Accion Texas underwriting team to further speed up the turnaround time.

Online Application. WS recently launched their loan application online, allowing prospective borrowers to apply on their own. This will further reduce staff time on entering the application into the MMS system.

Emily and Agnes also cite CAMEO’s role as liaison, trainer and convener of peer learning calls in assisting in their transition.

Even though the adoption of MMS necessitated many organizational changes, the WS team knew it was something they had to do in light of the new wave of online lending. “Being in the Bay Area, we are in the heart of the online lending explosion,” said Emily. “We needed to automate and turn deals faster to stay competitive.”

WS is leading the way in innovation and technology adoption.

20th Anniversary Recap

20th-anniversary-CAMEO-4c-vertical-smallThanks for Joining CAMEO at our Annual Member Meeting and 20th Anniversary Celebration.

Over 100 people helped us celebrate two decades of micro and building wealth in our communities!  We had a great day of learning, inspiration and fun.  During the morning, we heard about community level factors that are correlated with microbusiness and what that means for policy; we discussed the need for our sector to sit at the economic development table and re-imagine a new collaborative system; and we learned the proof that micro is BIG.  At lunch Judy Wicks inspired us with her story about creating an alternative economic development system by staying in one place, by truly engaging in local economic development.  And of course all of our award winners – Wells Fargo, Scott Hauge, Forescee Hogan-Rowles, Sheilah Rogers, Alfredo Garcia and Patty Rodriquez proved once again why we do the work we do.  And then in the afternoon, members gathered to discuss how to remain calm in the face of the disruption that we face. Finally, we kicked back and enjoyed connecting with our colleagues.

Thanks to our generous sponsors for making this event a success.

Event Sponsors
First Republic Bank, AT&T, Pacific Western Bank

Table Sponsors: CDC Small Business Finance and Renaissance Entrepreneurship Center

Half Table Sponsors: 3CORE, Accion San Diego, Arcata Economic Development Corporation, Community Action Partnership of Sonoma County, El Pajaro Community Development Corporation, Federal Home Loan Bank of San Francisco, Fresno Community Development Financial Institution, Opportunity Fund, Pacific Asian Consortium in Employment, The Prosperity Center, Ruby Road Leadership, TMC Development, Valley Economic Development Center
West Company, Women’s Economic Ventures, Working Solutions.

2014 Agenda

Morning Program

The New Labor Market, panel and conversation moderated by Lena Robinson, Regional Manager, Community Development, Northern California, Federal Reserve Bank of San Francisco

20th Anniversary Lunch

  • Keynote: Judy Wicks (bio), author of Good Morning, Beautiful Business of and Co-founder of Business Alliance for Local Living Economies (BALLE)
  • Faces of Entrepreneurship Awards
    • Proclamation Recognizing CAMEO – Assemblymember Jose Medina
    • Micro Business Champion – Wells Fargo Bank
    • Hero of Micro Business – Scott Hauge (bio), Small Business California, founder
    • Founders Award – Forescee Hogan-Rowles (bio), RISE Financial Pathways, President and CEO and Sheilah Rogers (bio), CAMEO co-founders
    • Faces of Entrepreneurship Award – Patty Rodriguez, SF Parking (Working Solutions Client) and Alfredo Garcia, Watsonville Diesel Company (El Pajaro CDC)

Afternoon Program

  • Member Meeting
  • Ignite Micro – Dealing with Disruption
    • Andrew Cole: Truth About California Micro Sector
    • Shufina English: Facts about Banking That Make You Go Hmmm…
    • Naldo Peliks: Stirring Up Entrepreneurial Training
    • Working Solutions: New Partnerships for a New Day
    • Boku Kodama: Creative Curriculum for New Markets
  • Light the Fire! response, a facilitated discussion

Speakers
Connie Evans Todd Greene dell gines photo Judy Wicks

from left to right: Connie Evans, Todd Greene, Dell Gines, Judy Wicks

Award Recipients
Scott Hauge Forescee Hogan-Rowles Sheilah Rogers

from left to right: Scott Hauge, Forescee Hogan-Rowles, Sheilah Rogers

WIPP Annual Leadership Meeting – 2014

Women Impacting Public Policy (WIPP) Announces Annual Leadership Meeting for Women Business Owners

Women business owners from across the country will be gathering in Washington, D.C. to grow their businesses, enhance their leadership skills and advocate on key issues impacting the women entrepreneurship community. Women Impacting Public Policy (WIPP) will be hosting their Annual Leadership Meeting on July 23-24, promising an opportunity to network and cultivate business opportunities with women business owners as well as interact with policymakers to discuss the challenges you are facing in your industry.

As part of our commitment to the women business owners in our network, CAMEO has worked with WIPP on both business education and policy geared towards women entrepreneurs.  WIPP’s Leadership Meeting is packed with programming that will delve into best practices in leadership and public policy issues to watch.

Attendees will be able to interact with policymakers in a special U.S. Senate meet & greet and congressional hearing on women entrepreneurship held by Senate Committee on Small Business & Entrepreneurship.  Additionally, the House Committee on Small Business will be hosting a reception for women business owners in attendance.   If you are interested in improving the economic and regulatory environment for your business and other women-owned businesses, join WIPP on July 23-24 in for the WIPP Annual Leadership Meeting.

To learn more about the meeting agenda and to register, visit WIPP.org.

Entrepreneurial Equality

New Tools for a More Inclusive SBA

On June 10, 2014, the SBA Administrator Contreras-Sweet outlined her priorities and goals for the SBA during a speech at the Center for American Progress in Washington, DC. And for the past few days, more details about specific programs have been issued by the SBA.

She outlined three priorities: be modern, be inclusive, and make new markets. That translates into modernizing the capital access programs with technology; creating a more inclusive SBA by tailoring programs that embrace our nation’s dynamic demographics; and serve as a “market maker” for small companies by opening new business channels within the federal government, corporate supply chains, and international commerce.

For more details, read her full comments.

Thank you, Neera, for that kind introduction and to the entire team at the Center for American Progress for hosting us today.

I recently received a call that would change my life and move my husband and me across the country. Two months ago, President Obama tasked me with three objectives: run an effective SBA, be a strong voice for America’s small businesses, and take the agency to the next level. I embraced this exciting and worthy mission, knowing small businesses are the backbone of our economy.

Small firms make up 99.7 percent of American employers. They generate two out of three net, new private sector jobs and account for half of all private sector employment. The future of our country is truly in the hands of the American entrepreneur.

SBA programs are infusing dollars into local markets to improve the domestic economy. Entrepreneurs inject capital into the economy more quickly as they cover payroll, buy equipment, and acquire real estate. Not only is SBA-backed capital more likely to be spent at home than abroad, but it’s also circulated faster in local communities, spurring more economic activity. With this in mind, I am eager for this opportunity to be leading the SBA.

You see I immigrated to this country from Guadalajara at the age of five, not speaking a word of English. My mother worked at a poultry processing plant so her six children could have opportunities she never had. My life’s journey has been one of seizing opportunities to help my family and build my community.

From grade-school hall monitor, to corporate executive, to California Cabinet Secretary, to bank founder, to now, a member of the President’s Cabinet, I was taught it’s not the titles we have that matters, it’s what we do with the titles we have. I’m living my American Dream. Now, I want every entrepreneur to live theirs.

I joined this Administration because President Obama is committed to providing equal opportunity and creating new pathways to the middle class. I know how committed he is to creating opportunities for small business owners. He has demonstrated this by cutting their taxes 18 times. He has created billions of dollars in tax credits, write-offs and deductions for those who start businesses, buy equipment and machinery, and invest in start-ups. He has made quality, affordable health insurance available to small business owners and their employees. Under this administration, SBA eliminated pages of regulations that were clogging the capital pipeline and causing more problems than they were solving. And we zeroed out fees on loans under $150,000, which has led to a 15 percent increase in our small dollar lending.

In my first two months on the job I have met with our field offices, our program leaders and with stakeholders – in Congress, the business community, our resource partners – all to strengthen our relationships and enhance our programs. Their insights and contributions have been invaluable, and we’ve already begun to act on their suggestions. In my first month, we removed regulatory obstacles to our real estate and equipment financing, and we launched a new national call center for Certified Development Companies to expedite 504 real estate loans.

Today, all of the jobs lost in the Great Recession have been recovered, yet our nation still faces a profound challenge: capital is not reaching small business owners equitably. The face of entrepreneurship is changing in America. More of those faces today belong to women, Latinos, African-Americans, Asian Americans, Native Americans, veterans, seniors, and business owners who are socially and economically disadvantaged. Too many in these groups cannot access the requisite expansion capital. Your gender, your race, your age, or your neighborhood should never impact whether you can get a small business loan. Only your creditworthiness should.

At the SBA, we will assure a continuum of support, especially for our underserved businesses.We’ll expand access to our core programs, we refer to as the “three Cs” – capital, consultation and contracting. And it goes without saying we’ll remain focused on our disaster assistance programs, so homeowners and business owners can access our help when they need us the most.

To advance our work on behalf of America’s entrepreneurs, I’m focusing my initial efforts in three areas. First, we will modernize and implement smart systems, so the SBA keeps pace with technological advances that are changing how we do banking and conduct business. To encourage our lending partners to provide more capital to Main Street, we will automate our credit analysis using predictive systems. Second, we will create a more inclusive SBA by tailoring programs that embrace our nation’s dynamic demographics. Third, we will serve as a “market maker” for small companies by opening new business channels within the federal government, corporate supply chains, and international commerce. We will be modern. We will be inclusive. And we will make new markets. This is how we’ll move the dial for entrepreneurs from all walks of American life.

Let’s explore these points more fully. First, we’re going to modernize our capital access programs to the new ways Americans are accessing financial services, and technology is the key. The prevailing challenge we face has been that our loan documentation is too complex and labor-intensive, forcing banks to hire specialized staff or contract it out – or walk away from the loan. We cannot afford to lose these partners and turn job creators away.

The time has come to reach out to all of our lending partners on small loans and bring new lenders into the SBA fold. To augment loan volume and multiply points of sale, I’m pleased to announce that we’re transforming into a smart system guarantee process to serve businesses better. Our Office of Capital Access has been testing and refining a predictive business credit scoring model for more than a decade, combining an entrepreneur’s personal and business credit scores. SBA’s total credit score will make it easier and less time-intensive for banks to do business with the SBA. This model is cost-reducing and credit-based. It ensures that risk characteristics – not socio-economic factors – determine who is deemed creditworthy.

We’re now so confident of our model’s predictive value on small loans that we’re eliminating cumbersome and impeding analyses of a company’s cash flow, a step that can delay loan decisions. Effective next month, I’m directing that SBA’s total credit scoring model be made available to all our lending partners for loans of $350,000 or less. We’re making these changes knowing it will simplify and streamline the lending process and get more small loans into the hands of entrepreneurs, especially the underserved.

We have another transformative initiative in the works: We call it “SBA One.” It’s a new, interactive, user-friendly SBA lending platform. Say goodbye to fax machines and mountains of paperwork. We will automate the uploading of documents and the generation of forms, and we will allow electronic signatures.
On each 7A loan, our core product, SBA One will save banks hours of processing time and thousands of dollars. The combination of SBA credit scoring and SBA One will incent more banks to partner with us, generating more loans and igniting economic activity. By making the process quicker, cheaper and more intuitive, these reforms will help existing lenders do more small-dollar lending.

These capital access improvements lead into my second priority area: tailoring our programs, so the SBA’s efforts are responsive to the diversity of this great nation. On an encouraging note, our lending to African Americans is up 29 percent over the last year. That’s important, because the Urban Institute found that women and minorities are three to five times more likely to be approved for an SBA-backed loan than a traditional loan.

Four out of five loan applications we receive from Hispanic-American and African-American business owners are for $150,000 or less. These smaller loans, then, are a vital part of our promise of equal opportunity in America. If a bank can’t quite say “yes” to a borrower, we’re asking them to partner with a microlender or a Community Advantage lender that can.

Microlenders and CDFIs specialize in providing technical assistance to underserved borrowers. They can spend time with small business owners to make their credit applications stronger. By facilitating partnerships within the lending space, the SBA can build an expanded capital pipeline. A successful microloan can be refinanced into a community advantage loan, which can be refinanced into a low-interest bank loan, helping borrowers build credit. This is one way to provide a pathway to the middle class.

We also have a special obligation to serve those who served us so well: our veterans. They fought for our freedoms, and now many are ready to fight for their dream of starting a business. Our armed forces have a track record of producing outstanding leaders. Veterans own two and a half million businesses that generate more than $1 trillion in sales a year.

This year, the SBA will counsel and train 15,000 transitioning service members through our Boots to Business Program. We’re helping them apply their military discipline and training to their dream of starting a business. America spends an average of $31,000 per service member to get them battle-ready while this program costs an average of $411 per veteran to get them business-ready.

This program has been so popular with our troops and so cost-effective that today I’m announcing its expansion. We’re calling it Boots to Business: Reboot. Starting this summer, in 12 cities across America, we will be opening this program to the 23 million veterans who’ve already made the transition to civilian life. Our first class will kick off at the White House on July 11th.

While our veterans represent an important group for the SBA, the fact is, we offer counseling for all entrepreneurs at every stage of the small business life cycle. We help small businesses start up and scale up, and we provide access to new markets so they can really take off.

Last month at Twitter headquarters in San Francisco, I announced a competition to fund 50 local entities that specialize in helping to launch new start-ups. We’re exporting the Silicon Valley model to Middle America to fund business incubators and growth accelerators in underserved communities. But we’re equally committed to helping small businesses that are already turning a profit but haven’t yet made it to the next level.

Ninety-two percent of new jobs come from the expansion of existing businesses. So today, I’m announcing Scale-Up America. We are bringing our successful entrepreneurship education program to up to 14 underserved communities across the country that will benefit from intensive SBA support. We’ll help firms gain market intelligence.

We’ll provide business consulting, and we’ll offer matchmaking with corporate and government buyers. The list of Scale Up communities that we’ll select will be announced later this year. Also, as part of our continuum of capital, the SBA is working to disperse investment capital more equitably.

Last year, about one-quarter of the companies capitalized by our Small Business Investment Companies were owned by minorities, women, or veterans – or those who conduct their business in rural or distressed urban areas. We’re focused on increasing these numbers through sustained outreach and through our Impact Investing Initiative.

But promoting inclusion is not just about gender, race, and socio-economics. One of the biggest demographic shifts affecting small businesses has to do with the fact that we’re living longer. The global population of those 65 and over is expected to triple by mid-century. More and more of our retiring Baby Boomers are starting a second act and finding fulfillment in entrepreneurship. Americans age 55 to 64 are creating nearly a quarter of our new businesses.
With their life’s experiences in their tool box, they are actually building businesses in larger numbers than their youthful counterparts. While there is evidence that our Encore counseling program for the 50+ group continues to be well received, considering the magnitude of its potential impact, a thoughtful examination is warranted about the program’s expansion potential, so that we might enrich their golden years.

Finally, the SBA will be a market maker by opening up new areas of business opportunity for small companies. We will be adaptive to signals in the domestic and global markets, and we will create the conditions for entrepreneurs to secure government contacts, enter corporate supply chains, and export their products globally.

The United States government is the largest procurer of goods and services in the world. The SBA works to level the playing field so the federal government meets its 23 percent small business contracting goal. Federal contracts are the oxygen that helps smaller firms hire and grow, supporting 450,000 jobs a year. And increasingly, these businesses are owned by women.

Women-owned businesses have grown by a remarkable 20 percent in just five years. More than a quarter of our small businesses are now owned or led by women. Currently, women entrepreneurs are considered under-represented in only 83 of the 260 industry categories, limiting their ability to receive federal set-asides. We believe the explosive growth of women-owned businesses will show that many additional industries should be added. So I’ve instructed my staff to conduct a formal study required for the SBA to re-visit the contracting landscape to ensure women have optimal access to the federal supply chain. Another important tool for federal agencies is sole-source authority. I’m encouraging Congress to give federal agencies this tool to level the playing field for women-owned businesses.

I know small firms – including women-owned businesses – can do more than supply the government. They’re ready to be suppliers to large corporations and international markets. Small businesses that secure corporate contracts increase their revenue by an average of 250 percent and increase their hiring by an average of 150 percent.

We know that large companies, utilizing just-in-time inventory replenishment, often struggle to identify a wider array of capable and nimble small suppliers. The American Supplier Initiative links small businesses with private sector, supply-chain opportunities. I’ll work to bring more CEOs into the SBA family and to secure commitments from them to make purchases through small business suppliers, thereby increasing demand for the corporations’ products and establishing symbiotic relationships.

And we will also expand this private-sector initiative to international commerce to help our firms compete globally. The SBA has learned from 30 roundtables and hearings, where we’ve collected small business feedback for use in trade negotiations with Europe and Asia.

Last year, the SBA shattered our record for export finance, supporting $2.8 billion in export sales. I believe we can do even more to help our firms reach the 95 percent of global consumers who live outside of our borders. We’ll continue to support the President’s robust trade agenda, including the Transatlantic Trade and Investment Partnership and the Trans Pacific Partnership. And we’ll ensure small businesses have the financing they need to engage internationally.

As you might expect, the banker in me inquires as to the stimulative effect our programs are having and their ROI – return on investment. The ROI on our loan programs is exceptional. Keep in mind: We allow lenders to make loans they otherwise would not. We fill market gaps. Our loans go to entrepreneurs who don’t quite yet meet conventional underwriting standards. SBA has a $100 billion portfolio that’s highly stimulative. Every dollar we inject into the economy is capital that would otherwise stay on the sidelines.

Moreover, every program I’ve outlined today is fully paid for with our existing appropriations from Congress. I know these are difficult budget times. We will measure our success by tracking the revenue gains and job gains that result from these initiatives. Programs that do not deliver on these metrics will be reformed or eliminated. Our largest lending program, 7a, has been operating at zero subsidy for two years. These loans are not costing the American taxpayers a single dime. We know small businesses must do more with less. The SBA should lead by example. An adaptive SBA must be modern, inclusive, and market-sensitive, all the while delivering a strong return on investment to the taxpayer.

The initiatives I announced today are not the end of our conversation but are a good start. We must adapt to smart technologies. We must be responsive to changing cultures, new lifestyles and evolving demographics and psychographics. Finally, we must continue to anticipate and seize what portends for tomorrow’s markets. To repeat, the SBA will be modern, inclusive, and be a market maker for small businesses.

My arrival in this country has brought me untold opportunities. My gratitude is matched only by my motivation to open more opportunities to every American who shares the entrepreneurial spirit. I never imagined that I would be here today. But now that I am the head of the Small Business Administration, I am dedicating myself to making small businesses big businesses. The hallmark of my work will be to foster entrepreneurial equality, preserving our nation’s preeminent role as the world’s leading economy. Let’s make small business a big deal. The SBA’s work has never been more vital. For me, SBA stands for Smart, Bold and Accessible, in every corner of the nation. God bless you, and God bless the United States of America.