Learning more about the lending habits in the small business arena could tell researchers a great deal about the state of the U.S. economy. In the aftermath of the recession, many people who might now be eligible for loans are not aware of it, perhaps believing that lenders are still tightly holding on to money. One of the industries this has affected the most is housing, keeping some renters in their current properties rather than exploring the potential for buying a home.
The potential learnings from such research, however, could pay off in big ways outside of housing as well. New information could demonstrate to a new entrepreneur which banks have a strong history of making funds available to women and minorities, for example. It could also provide critical details to regulators and advocates about general trends in lending. With so much to offer, it is surprising that this kind of data is not already collected in a meaningful manner.
Even though the 2010 Dodd-Frank law mandated that lenders provide better details about loans made to small businesses, this has not panned out in terms of clear data that anyone can view. Some of the data they were supposed to provide was gender and race of business owners who received loans and average business revenue. The lenders cannot really be held responsible for this lack of provision, though, because the Consumer Financial Protection Bureau has not yet put together a rule to enforce these requirements.
Lenders already collect a fair amount of data about mortgage borrowers, including income level, race, ethnicity, and gender, but there is no enforcement as of yet that would prompt small business lenders to do the same. Some advocates believe that this lack of lending is making it more difficult to access credit, especially for some groups of borrowers. The economy, though, could significantly benefit from the investment in small businesses.
That is why legislators are putting more pressure on the bureau to move forward with creation of a rule. A letter written to the director this summer had signatures from 84 Democrats in the House who believe that enforcing this requirement is crucial to ensure that fair-lending laws are having the impact intended. Creating jobs within small businesses has a strong link to whether credit is available and what barriers are present when an individual attempts to create a new small business. In past statements, bureau representatives have said they plan to use the past rule about mortgage borrower data collection to influence the verbiage of this new rule. According to some early reports, it looks like small business lending has not picked up pace since the economy began to recover from the recession.
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