Small Business Lending Outlook for 2020

Judy Jandro, SVP of Small Business Lending, CRF

Small businesses are driving a growing economy heading into a new decade. The Federal Reserve Bank’s 2018 Small Business Credit Survey indicated that a majority of small businesses were experiencing revenue growth, while more than one-third also added employees to their payrolls.

However, this same survey showed that 2019 did not hold the same promise for growth as 2018; the number of firms anticipating employment growth in 2019 was four percent fewer than in 2018. The good news? This trend was also accompanied by a growing demand for small business financing (up three percent between 2018 and 2019).

A new decade brings new challenges and opportunities for small businesses, and one place where CRF can help is by creating and sustaining small business lending alternatives and continuing to provide access to otherwise unavailable capital.

The Growth of Online Lending

According to the 2018 Small Business Credit Survey, applications to online lenders have continued to trend upward. However, online lenders were more likely to have low applicant satisfaction than traditional lenders.

Surprisingly, despite overall growth in small business lending, medium- and high-credit-risk applicants were less likely to apply for loans from banks, credit unions and Community Development Financial Institutions (CDFIs) than online lenders.

Even with an approval rate of 66 percent, institutional lenders continue to be overlooked by entrepreneurs who need financing most acutely.

Traditional institutions will need to be highly focused on creating an optimal borrower experience.

Changes to SBA

New Small Business Administration administrator Jovita Carranza – appointed by President Trump in April 2019 – was confirmed by the Senate this month. Ms. Carranza served as the 44th Treasurer of the United States under President George W. Bush.

Carranza made her congressional debut in December during testimony to the Senate Committee on Small Business and Entrepreneurship. The Coleman Report shared that her remarks prioritized underrepresented entrepreneurs, including African American entrepreneurs, Latino small business owners, and veteran-owned start-ups, and strengthening connections between small businesses and SBA support services.

“Women entrepreneurship is on the rise, but we can do more to ensure they have access to relevant resources and professional support so that they can scale and take their businesses to the next level,” Carranza said in her testimony.

How CRF Helps

CRF small business lending helps borrowers, funders and lending partners leverage loans to achieve outsized community impact.

In 2020, more than 29 percent of small businesses will fail due to a lack of capital. That doesn’t need to be the case; 57 percent of small business loan applicants seek $100,000 or less. While the loan amounts may be small, the impact financing has on a business can mean the difference between success or failure.

Clearly, there is capacity to close the gap between businesses that get small business loans and those that don’t. CRF is committed to changing that in 2020 and beyond.


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