Main Street Challenges and Policy Solutions

Louis Caditz-Peck  00:05

All right, thanks. Well, I’m excited to continue the conversation. It’s been so rich. We’ve heard from we’ve heard from researchers, we’ve heard from technologists, we’ve heard from investors, we heard from Rebecca and other small business owners. So I’m excited that we’re here to continue the conversation and turn it towards drilling down a little more on what the challenges that small businesses are facing are in financing and some solutions for what we could do together to improve it. And so let’s introduce the panelists, which continue this theme of bringing together voices from this the broadest swath. So let’s, let’s start with Karida and move down.

Karida Collins  00:49

Okay, so my name is cKarida  Collins, and I am a small business owner. I own a business called Neighborhood Fiber Company. It is a hand dyed yarn company catering mostly to hand knitters, crocheters, yarn shops, that kind of thing.

Ashley Urisman 01:11

Can you guys hear me? Yes, this is working. Hi. I’m Ashley Urisman. I am the Director of State Government Affairs for the American FinTech Council.

Jesse Van Tol  01:19

And Jesse Van Tol, President and CEO of the National Community Reinvestment Coalition, a coalition of 700 community-based organizations around the country dedicated to building a just economy in the realm of housing, small business, etc. Thanks.

Louis Caditz-Peck  01:36

So Karida, let’s start with you. How did you start Neighborhood Fiber Company and what has it become today?

Karida Collins  01:42

Okay, so way back in 2006 when I was young and in, you know, the early bloom of life, I Idecided I wanted to have a yarn business. I was already knitting. I was managing a yarn store, and I had finished grad school, and realized that I didn’t want to continue on that path, so I decided that I should start a hand dyed yarn business, based on the fact that I am good with color and that I was confident enough that I would figure the rest of it out. It was in a basement apartment. It was very gritty in terms of getting started and, you know, since then, and that was, that was in, that was 20 years ago. So since then, I have, you know, moved out of DC, expanded things, you know, gone from being a one employee kind of shop to an additional five full time employees at one point, and you know, I just keep pivoting, trying to make it, keep it, keep it going. I think that’s what all small business owners are doing right now. We’re all just trying to keep it going.

Louis Caditz-Peck  03:00

And so Jesse, helping small business owners like Karida is core to the work that NCRC and its 700 members do. Why is that part of that work?

Jesse Van Tol  03:10

Yeah, when we think about, you know, our work to address wealth inequality and racial wealth inequality in particular, we think about, we think about communities and what’s important in a community. So healthy, vibrant community has affordable housing, has great public assets and has great small businesses. And so when we think about, you know, sort of the wealth building up ladders in America, home ownership, one significant one for many people that has disparate outcomes and unequal opportunities based on race and other things, small business too. The ability to start a small business, grow a small business can be transformational, not just for an individual, for their family in terms of economic outcomes, but for a community as well, and so for us, we’re our members are local community economic developers who are working to ensure that communities are vibrant, and small businesses are a critical component of that.

Louis Caditz-Peck  04:20

Thanks Jesse and Karida. Talking about that vibrancy, I wonder if you could share a little more about the what goes on at your storefront that you have now in Baltimore, and maybe some highlights from your business.

Karida Collins  04:31

Sure, so when you talk about community, that’s actually a big part of my business, all of my colors are named for neighborhoods. I always wanted to emphasize the beauty that can be found in urban settings, instead of, you know, everything being named for and based on, like nature photographs and things like that. I was the Urban Yarn Company, which means exactly what you think it means when I first got started, not just because I was living in DC. Over the course of years, with the business, I’ve made it a priority to invest in the community, to the point that in 2020 I was able to raise over $100,000 and start a donor advised fund. So basically, I had gotten a reputation for using the yarn to raise money and make donations, and people were looking for a way to do something, and a couple of companies wanted to just write me a check. And I was like, but I’m not a nonprofit. I don’t I’m a for profit. So I created a GoFundMe, and was shooting for $10 grand, $10000 and because that’s the minimum you need to start a donor advised fund. And instead, I raised over $100000 in 30 days, just from, like, small donations from customers and friends of customers. And you know, we’ve donated over $150,000 to nonprofits, primarily based in Baltimore, Maryland, which is where I am, which is where I’m based, where I live, and primarily black-led.

Louis Caditz-Peck  06:22

Thanks. Karida, so over the course of this business, what role has financing played in it?

Karida Collins  06:31

I think every small business owner has a financing story. I think I have at least five or six. You know, I started with a small loan from my mom, $1,000 which she was serious about having me pay back. And you know, since then, I think that I’ve had every loan product available, good, bad and worse. The merchant cash advances from companies that were offering me products I didn’t quite understand at the time. I never thought that I wouldn’t have the same protections that I have as a consumer, an individual consumer, in business, I really, I truly believed that, you know, because I’m still just an individual, right? And most of us small business owners are like your proverbial Mom and Pop. I thought that I would have the same sort of requirements for disclosure, and you know, then I realized later, when I’m in a bad situation and all of my money is being like withdrawn from my checking account on a daily or weekly basis, like, oh, you know what? I don’t know what the APR on this is. And, you know what, maybe I can’t afford this loan. And if I had been at a bank or a CDFI, or, you know, someplace like that, I would have maybe had a little more information, and maybe somebody would have gone over what I can afford to repay based on all of my expenses and not just my revenue. I’ve had loans from PayPal, Shopify, Square. One that was through, I have a story. Do you want my story, my, my, including all, all of the company’s story?

Louis Caditz-Peck  08:37

Sure. Let’s hear it, Karida

Karida Collins  08:38

Okay, so I took out a loan from web bank through PayPal, and I was getting they were taking weekly withdrawals. I ran into some tough times because tariffs, Ooh, boy.

Louis Caditz-Peck  08:59

This is a familiar theme from this panel.

Karida Collins  09:00

Yeah, I think that. Well, I think this story is, like so many people’s story. It’s not even really unique. I think it’s very common that, you know, you make plans. Small businesses owners are optimists, even if we don’t feel like we are, we are we believe that our sales are going to be good. We believe that the future is going to be better than the current situation, even we don’t, even when we don’t say that, the fact that we’re still running small businesses is the proof, right? So I have this Web Bank loan. They’re taking out, like $1,200 a week, and I’m and my sales are falling, and my expenses are rising. And I actually had a health situation that put me in the hospital for nine days, and when I came out of that, I was not able to sort of keep working at the level that I had been. I was really burnt out. So all of this is going on, and I missed like six payments. Because there was no money in my account for them to take. And I was just getting back to getting things together, and all of a sudden my online store, which is my primary source of income, stops depositing money into my checking account. My online store is with Shopify, so Shopify won’t give me any of the money from the sales that I’m making because Web Bank has placed a lien on the money through Stripe, who processes payments for Shopify. Now I didn’t know that at the time. I just knew that Shopify wasn’t giving my money, but because I also had a loan with Shopify, they were still taking the money, like their percentage of the sales from my checking account too. So not only am I not getting any money, but even when I have sales, it’s costing me money.

Karida Collins  10:58

And so at that point, I’m running up credit cards, right? Because I don’t want to lose my customers. I want to ship them their products. And closing down the store seems like, just, like, if I do that, it’s over, right? Like, that’s the end. And so I am trying to figure out what’s going on. It took me weeks to even find out that I had a lien, and that was why they weren’t giving me my money. When you want to get in touch with Shopify, you have to use the little chat bot, and first use the bot, and then a person comes on and they will help you, but they can only help you if you have, like, some low level problems. Certain things have to be run up the chain to a different committee, and like, liens was definitely above the pay grade of whoever was doing their chat bot thing, and they kept telling me, you’ll get an email explaining what’s going on. Just wait. We’re going to run this up the chain. So I do this four or five times, and by the end, because I am a polite person, and I know that working in customer service means that you deal with terrible people, so I’m trying to be really nice to them and saying things like, I understand that this isn’t your fault, but you’re the only person that I am able to be in touch with, and so I am getting very angry. But, you know, typing all of it so it doesn’t have the same real force

Louis Caditz-Peck  12:19

Or a smiley at the end.

Karida Collins  12:21

Yeah, like I’m furious at you right now, heart emoji. And at the same time, I know in my head that this has something to do with my loan from Web Bank. So I get with them, I make a lump sum payment to them that I borrowed from my mom, and I get right with them, like we adjust, they adjust my payments. I’m back in their good graces. I’m making my payments. And then they tell me, yes, because of the lien against you. And I’m like, The what now, who? So that’s how I found out I had a lien. It was actually from Web Bank dressed up like PayPal, and so at that point, I’ve got Web Bank, PayPal and Stripe, all somehow having to do with where my money is. Web Bank tells me that they have removed the lien. I’m like, great. Well, actually, first they said I had to make four payments before they would lift the lien. So that was another month of sales. I make the four payments, they take off the lien. All of a sudden, I’m like, all right, money is going to start flowing. And it did. It started flowing again. But all of the money from the sales that I made during the time period when the lien was active, none of that money comes to me. And I don’t know why. All I know is that it says that there’s this balance of over $10,000 in Shopify, and it’s just like, not, it’s not part of the payout. And I’m like, well, where’s my f’n money? Like, come on. So I, you know, again, like, I keep going to Shopify, because for me, like, what I can tell web banks telling me that they didn’t do it, Shopify is the only person I’m dealing with. So I’m like, all right, you guys, I can’t get anybody to get in touch with me. They keep promising me emails, nothing’s happening until finally, like, one night at, like, I don’t know, like 11:30 on a weeknight, which, if you have an eight year old like I do, that’s the middle of the night. I’m, like, frustrated and stressed out. And so I make this crazy social media post that’s like, I don’t know why Shopify has my money, and they won’t give it to me, but it’s over $10,000 and you guys, I do not know what to do, and I can’t believe I’m making this post. And here are all these screenshots. And so the knitting world is actually, there are a lot of us.

Louis Caditz-Peck  15:05

There are, don’t piss off the knitters.

Karida Collins  15:08

I mean, people have learned. People have learned. So I post this, I have like 30,000 followers on Instagram, and all of a sudden they’re all tagging Shopify, and they’re posting it on their pages, and then their friends are tagging Shopify. Shopify, do better, Shopify. How dare you treat a woman owned business like this? You know, Shopify, this is not a good look, and it was overwhelming at first, but then all of a sudden, I’m getting emails from Shopify. Suddenly there’s someone available to explain this to me. One of them even had the nerve to sound kind of pissed off, and that’s what it took for me to find out that the lien that had been explained to me was lifted, but that the money that they had collected was actually going to Web Bank and was not coming back to me. So even though I had squared everything with web bank, they never told me that they were going to also keep that money. Shopify never told me stripe, who was actually like processing the payments and moving the money around. Never told me. I just had to figure it out by blasting them on the internet. And so now I’m, you know, so that money’s just gone like it went towards my loan balance, which is great. The loan balance is lower, but could have really used that $10,000.

Louis Caditz-Peck  16:44

Karida, thanks for sharing that. There is a lot to unpack there. A lot of that really got into FinTech, so that might be a good time to Ashley to bring you into the conversation.

Ashley Urisman  16:53

Absolutely, yeah. So I’m with the American FinTech Council. Our mission is to promote a transparent, inclusive and customer centric financial system and to advocate for sound public policy. We are standards based organization. We promote, like I said, transparency. We support interest rate caps. And we really want to create a FinTech system, a financial system that meets people where they are. We have 150 members. None of the organizations you named are AFC members. Just want to say that right now, so I’m really sorry that that happened to you, because what we are really trying to build at AFC is a system that works for consumers and business owners like you, by leveraging online commerce and using this innovation and this technology to make capital more accessible and to make it work for people, and by using the efficiency that new technology creates to pass on savings and pass on access to financial systems that work to small business owners like yourself. And you know, we’ve been working with Louis and his organization, the Response Responsible Business Lending Coalition on we are co signers to his small business borrower Bill of Rights, and we are working for advocating, working on, advocating for legislation that requires the disclosure of APR on small business loans so that people like yourself, folks who are financially literate, who are familiar with financial tools and loans like mortgages and things like that, are speaking the same language when you’re comparing financial products, whether that be your mortgage for your home, the interest rate on your personal credit card, or the financial products you’re using to fund your business. So we are we’re so sorry that happened to you. We’re working hard to make sure that it doesn’t happen again and that it doesn’t happen to other people as well.

Louis Caditz-Peck  18:40

I appreciate that. Thanks. Well, Ashley, I want to give due credit to all of the folks that got together to conceive of and write the Small Business Owner Bill of Rights. So I’m proud that I get to stand up here and be the face of it. I wonder if you could speak to how AFC chose, why AFC chose to endorse it, and what it has to do with your work and what it means to you guys.

Ashley Urisman  19:02

Yeah, I think it fits very neatly into our mission statement. I think the small business borrow Bill of Rights is a very simple kind of concept I have kind of the tenants written out here. It’s the right to transparent pricing in terms so things like APR disclosures, that’s, you know, basic transparency. It’s a right to, you know, giving consumers access to non abusive products. It’s a right to have responsible underwriting for individual loans, that is, you know, ascertaining a borrower’s ability to repay and understanding what some of your expenses are beyond just what you owe the borrower. Right? So if you are taking out, for example, a loan to refinance personal credit card debt, you’re going to be asked questions about, what is your income, but also, what is your housing cost, what are some of your other expenses that are going to impact your ability to repay these loans? But you know, some of the products that you were served did not take that into account, and were sort of draining your business when you had other expenses to to address. So we want to make sure that that is a standard that takes hold for small business products, the right to fair treatment from from brokers. That’s, again, I don’t know that you had fair treatment, and if you didn’t have a social media following, would you have been able to address the issues you were having with your loan servicers. The right to inclusive credit access, not everyone has a right to credit and is able to access the resources they need to finance their ideas and the right to fair collection practices, which, again, you weren’t really given the right to work out your issues until you went viral for complaining about your problems. So it’s a really simple concept that, again, helps people like yourself be able to, you know, run your business, and it’s a it creates a fair financial system that gives people access to credit and greases the wheels of the economy.

Louis Caditz-Peck  21:08

Thanks Ashley, so Jesse, what do you hear? You know, you get a broad view of how small business financing is being experienced in communities all over the country. What are you hearing from your members?

Jesse Van Tol  21:18

Yeah, unfortunately, Karida’s story, which is heartbreaking, is is all too common. I mean, it’s echoes of a lot of what we’re hearing elsewhere. I mean, I think that really illustrates why the Small Business Borrowers Bill of Rights was important and necessary, why the Responsible Business Lending Coalition is critical today. So we see small business borrowers, whether they show up at our CDFI at one of the 120 or so CDFIs in the NCRC membership network, whether they show up at the doorsteps of one of our members who works with small businesses, we see a lot of the same issues that the what you said, Karida, about I didn’t quite understand, is something that we’re hearing a lot of our members in New Jersey have published a piece several months ago. Just the costs are staggering. So in addition to sort of people either losing the business or going into default, people are paying more for their financing. In fact, financing is sort of ever present. A lot of small businesses are inundated with financing offers, but at very expensive rates and potentially with very predatory terms practices and abuses. So our member New Jersey Citizen Action published a piece showing that New Jersey small businesses are overpaying between $133 million to $630 million annually in unnecessary interest in fees, often to out of state financing firms, merchant, cash advance, some of the types of firms that were mentioned earlier. And so that’s a staggering amount of money. And it’s even worse for black and brown businesses, who are often targeted for sort of predatory inclusion financing that is more expensive, you know, available, but much more expensive. And so those are trends that we see in a variety of ways.

Jesse Van Tol  23:28

And I think unfortunately, the sort of aspects of your story really illustrate, you know, on some levels, we see technological innovation in small business financing, things that look like inefficiencies have sometimes baked into them, whether by intention and regulation or just as a consequence of the way things were done, they have baked into them certain rights, certain friction points that actually create a better experience for the borrower. And so while we see interesting innovations in the small business financing space, some part of that looks like just a greater ability to extract revenue from the small business in a variety of ways, including through unfair practices and treatment.

Louis Caditz-Peck  24:21

So Jesse, you touched on a theme that I wanted to get folks reaction to on the panel, which is access to capital. And the main issue we have talked about for capital for small businesses you know, for decades, has been the problem that small businesses face in financing, is access to capital. And I wonder if folks could react to Karida, what’s your experience been? Is access to capital a challenge, and is that? Is that a helpful frame?

Karida Collins  24:47

Still? I think that access to traditional, traditionally presented capital, like bank loans, is still something that you know, is tight, like after the the mortgage bubble burst and everything crashed, and interest rates went up, and it was really hard to get a loan. And I don’t think that it’s that much easier now, but at the same time, the sort of the other lenders are like, it’s easy to get capital. You know, I’ve got five phone calls, five voicemails today from people who swear that that I should have a $3 million line of credit. And, you know that is so those calls are so ridiculous that it’s obviously a scam. Like it feels like a scam, but once you have one UCC lien, your information is out there, and they are targeting you, and they are calling you, they are texting you, they are emailing you. They are mailing you stuff with that looks like it’s a check, right? And then you open it, and it’s like line of credit for business owner. There’s plenty of that money out there, and it’s, I think what it’s done is it’s overshadowed the fact that there is still a need for legitimate capital like I should be able to walk into the bank and get a bank loan. I should there should be more like, I should be able, I have a CDFI loan, right? And I only ended up with that because of specific people who took an interest in what I was doing. Because for a while, like Baltimore was really investing money into the arts and into small businesses, and, you know, I got a couple grants. And because of that, I caught the attention of people who were like, here, let me put you with Baltimore Community Lending. And that was really helpful, and it was really important. And so that, yeah, I mean, the money is there, but it’s it’s trash, like it’s garbage.

Louis Caditz-Peck  27:12

So Ashley, I wonder, you know, obviously you described your work as advancing responsible fintech. And I think something that we heard in in what Karida was framing out was traditional capital can be a challenge to access. There’s all this new stuff. How does the work that you do as the American FinTech council with the Small Business Borrowers Bill of Rights, the associated advocacy connect to helping support the development of really innovative and responsible options that are, that are FinTech or otherwise non bank, or connected to bank, and all the complicated ways that that you do?

Ashley Urisman  27:51

Yeah, I think there’s a few ways it plays in, first of all, very specifically with the Small Business Borrowers Bill of Rights and some of the legislation we’ve been working on. It creates price transparency. We have been advocating for APR disclosure bills, working on a bill in my home state of Illinois. I know there was just a hearing in Maryland on a similar bill, so that small business owners are able to compare the offers they’re getting and make an educated decision about what is going to be right for them. The other piece is the FinTech industry, I think, takes it helps meet borrowers where they are, and it might even take, you know, some of the bias out of lending and give borrowers an opportunity to access capital they may not have, and as long as there are responsible guardrails in place to ensure that these products are, you know, not exorbitantly priced, that they are not you know what happened with you, with some of your vendors, is not happening across the board. You know, I’m sure you’re someone who faces bias when you maybe walk into a bank branch. That’s not something you’re going to get if you’re filling out necessarily an application online. So it really helps, you know, blind the process based on the merit of a business versus, you know, other built in biases as well. So I think that is certainly an avenue that it helps create equity and access to capital.

Louis Caditz-Peck  29:17

Thanks, Ashley, well, Jesse, that’s something I know NCRC has done original research on,

Louis Caditz-Peck  29:22

Yeah, I mean, I think I’m still created, you know, but trash, would you call it? Trash money? You know, access to capital is, is a significant challenges for most small businesses. And you know, when we, when we think about the small business ecosystem, you have a situation today where there are more small businesses, really, than ever before, partially because of population growth and other things, but less small businesses that sort of scale, this sort of startup dynamism problem, and there are a lot of reasons for that. Corporate concentration. Amazon, et cetera, but access to capital is certainly one of them, and we continue to see whether it’s walking into a traditional bank, where our mystery shopping and testing has show that people face discrimination. They face disparities in how they’re treated. Not every product is discussed with them. It’s clearly a challenge if you’re accessing capital or credit from a bank. But so too, when we look at some of these, you know, kind of predatory financing operations, Merchant Cash Advance, there are really significant challenges with more predatory forms of financing small businesses. So it’s still, I think any small business would tell you there was a statistic on the panel earlier about cash flow, 82% was it was someone out there that use the statistic. It’s still a really significant factor for small businesses. I think the research shows you know that this is a major factor in their growth and scaling.

Jesse Van Tol  31:05

And yeah, I think there are some ways in which you can think about technological innovation as exciting. Every small business owner potentially has a consumer attorney in their pocket, potentially has the ability to analyze in real time their credit contracts thanks to the use of AI tools, could potentially, you know, sort of be given in real time questions to ask or things to consider or comparisons to, is this the best sort of loan product available to you that is a potential outcome of, you know, some of the kind of technological changes we’re seeing, AI in particular, and I think there’s also tremendous opportunity for, you know, what results from that to be extractive, you know, I think I said earlier, sort of shades of the subprime mortgage crisis. I, you know, I remember during the midst of the subprime mortgage crisis, or before, really we knew it as a crisis, it was like, you know, there’s these, you know, technology forward, companies called mortgage companies that are making more mortgages than banks. And that was, you know, that was part of the competitive advantages of Countrywide and others is, is, in fact, you know, was there investment in technology? And we know how that story sort of ended, you know the banking system kind of followed into the abyss, and we ended up with a financial crisis as a result.

Jesse Van Tol  32:48

And I think that there are shades of similar things happening today in the small business lending landscape, which is why I think having standards, whether that’s ASC, the Small Business Borrowers Bill of Rights, the Responsible Business Lending Coalition, having basic disclosures. I think the small business Tila disclosures that we’re working on together are incredibly important. 1071, as a data disclosure element, so that we know who is getting small business lending and on what terms. These are all policy issues that we’re working on to make sure that at least we have a collective understanding and that there are basic protections in place to ensure that some of these kinds of things don’t happen.

Karida Collins  33:39

Can I add one thing about bias? So I’ve been a black woman my whole life, so when I walked into the bank and was facing bias or whatever, when I would tell people about my business, I expected that specific bias. Though, what I didn’t expect is that, because my business is a lady business, it’s a craft business. The expectation like that people will be like, oh, so you have, like, an Etsy shop, and I’m like, I had a million dollars in revenue last year. Like, I’m I’m paying health insurance for employees. You can back off so, you know, it’s hard to get in certain industries it’s hard to get people to take you seriously, just because of what people think the industry is. I remember when there was this big to do because some of venture capitalist bros announced that they were going to start investing in yarn things, and they were like, did you know that there are more knitters than golfers? Like, everybody’s mind is blown, and there we’re we just need to do this, because these women, they they knit, and, you know, again, you don’t come for the knitters, because they’re crazy. And there’s so many of them. And it kind of like, I think. They ate them. I think they actually ate them, and now they’re no more, but sort of different kinds of businesses that may not have the same like, what if you say you’re open an accounting firm, you’re running an accounting firm, versus running a handyman company, or something like being able to put that in to a situation, into a some technologically based lending stuff that would maybe allow you to be taken seriously in a way that you wouldn’t in the bank just because of the type of business that you run.

Louis Caditz-Peck  35:34

Thanks, Karida, I think that so many of the problems and concerns have been illustrated so far on this panel and also in the conversations earlier today. So let’s start talking about solutions, and let’s start Ashley with with one that has already been in the conversation so far, the policy work that that you and NCRC and Responsible Business Lending Coalition and others are working on together.

Ashley Urisman  36:02

I think it all comes back to transparency. Like I said, empowering borrowers be that small business owners individuals to be armed with the information they need to make they need in order to make the best financial decisions for themselves and for their businesses. Like I said, the APR transparency bills are out there. I know they have already been passed in New York and California, those state economies have not suffered because of pricing transparency. We have a bill we’re working on in Illinois. There’s a bill that, as I mentioned, was heard earlier this week in Maryland. So hopefully similar policies can be replicated across the US and create better transparency for small business owners.

Louis Caditz-Peck  36:44

Thanks, Ashley and Jesse. NCRC is a you know, known as a major policy voice federally, and you’re also active in the States. Anything you’d like to share about the state policy work that you’re doing and what impact it’s accomplishing for your members.

Louis Caditz-Peck  36:58

Yeah, I think, you know, we have been active with the Responsible Business Lending Coalition and working on state bills, state TLA disclosures. I know we’ve worked together to pass seven state bills. I know, just the other day, on Tuesday, we were in Maryland, our members lobbying on this issue. In fact, one of our members is here today, who was working with us on that so really important that we think about moving these frameworks, especially given the federal policy context, forward at the state level, both to have a minimum standard in important places, but also to put some pressure on for federal reform. I think it’s, you know, sort of astounding that we can’t, sort of all agree that, at a minimum, APR disclosure is an important thing, that we have the data back to sort of federal policy through 1071 to know who’s receiving a small business loan From, whether it’s the banks who will be covered under 1071 moving forward or merchant cash advance companies who were excluded from the most recent version of of 1071 so we we, along with Woodstock and Brent’s here from Woodstock, rise economy and Main Street Alliance are suing the Trump administration over over their 1071 rule to make sure that we have that data disclosure, which is, you know, core and fundamental to our understanding, certainly, of equity within small business lending and small business lending equitable, but also, more fundamentally, just the market. What’s happening within the realm of small business lending? Who’s getting what kinds of loans at what price is, you know, has been core and fundamental to our understanding of mortgage markets for, you know, decades now, and we need that data on the small business lending side as well.

Louis Caditz-Peck  39:01

Thanks Jesse. So Ashley, in the work that you’ve been doing in Illinois, what have you seen? You know, we just heard NCRC working on this, and NCRC members in AFC. What have you seen about who this small business advocacy work brings together and and also where it divides?

Ashley Urisman  39:21

Yeah, it’s been a really interesting coalition. It’s not necessarily a coalition that AFC has the privilege of working with often, but it’s really been great to see advocates, kind of across the board, come together, advocates like ourselves who support, you know, responsible business practices and responsible innovation, consumer advocate groups, social justice advocates as well. So it’s been really great to collaborate on this issue, to kind of help support everyone in the state like Illinois that just is so diverse and there’s so much need for access to fair capital in the state.

Louis Caditz-Peck  39:57

Thanks, Ashley. I. And let’s, before we go to questions, let’s look forward. Karida, if you could ask policymakers for for one change that you think would help folks, what would it be?

Karida Collins  40:16

I would want the same two? Well, you know, I could make I think the most important thing, though, is, you know, bills like the Truth in Lending Act, I want the same protections and requirements for disclosures, all of the things that I take for granted as an individual person, as an individual consumer. I would like to have those same protections as a small business owner, because most of us are individuals, and, you know, I have some talking points that you guys gave me that I appreciate, because all of them like, I’m not here to give you numbers and statistics, because I’m here for the story you guys have the stats, but it was surprising to me to be allowed to see that only 18% of small businesses get loans from banks. And then I thought about it, and it made sense, because the rest of us are using friends and family and personal credit cards, and that doesn’t open up the same amount of capital that would be available if it were coming from a bank or and these products are products right where we are consuming these products, we can’t compare them right now. If we’re talking about MCAS and the different kinds of loans that people are emailing me about right now, because we don’t have that information. So I would think APR is just like the barest, the bare minimum, like, come on. I really, I truly, did not expect that. I didn’t know that I wouldn’t be able to find out the APR one alone, without a super computer and an advanced degree, just because it’s so hidden.

Louis Caditz-Peck  42:10

Yeah I know we’ve got some of the researchers in the Federal Reserve, in the office and in the room, and one of the studies that they did on on this question of small business disclosures and what information is helpful to small businesses. Had had a research experiment about that that really struck me, which was they, they asked, they showed small business owners disclosures, as they are used on small business products today. And they said, do these tell you everything you need to know? And everybody said, yes. And then they said, Is there anything else you’d want to know that’s not on here? And nobody said yes. And then they said, okay, do you know what the interest rate is? And everybody said yes. And then they said, kay, what’s the interest rate? And only at that point did people realize they actually didn’t know. And the Fed researchers said, well, guess. And the guesses just were all over the board. They ranged, if I’m remembering right, from, you know, low single digits, to someone said a whopping 30% and then the federal reserve study said actually, the effective interest rate, or APR, was 60% and I think I raised that to just illustrate that it’s not it’s not obvious to people that they’re not getting information when it’s presented in a way that is presented as this is the information you need. So as a final question, before we go to questions, Ashley and Jesse, could you each speak to what you particularly would see as progress on helping small businesses with respect to financing over the next couple years,

Ashley Urisman  43:46

I think just to build on what has been said before, greater transparency, mandating Tila disclosures, or similar disclosures for small business borrowers, and Building kind of a uniform national framework for that,

Louis Caditz-Peck  44:03

I’m gonna go big. I, you know, small businesses, which are so often sort of lifted up by politicians, is kind of, you know, the most important kind of constituency to really, in a sense of the American political system are, are, I think should, should be the most powerful constituency in America. And yet they’re not. And so I think certainly, the kinds of things that we’re advocating for at the state level, APR, disclosure, we ought to have that at the federal level as well. We need to get 1071, done across the finish line. We need that data. My son is 15 years old. I will have raised the whole adult child between the time that we passed 1071 as part of Dodd Frank, and by the time it goes into effect, it’s high past time that we do that. But fundamentally, we need both an economic system and a system of financing that better supports small businesses in a major way. And so I think we need to think big about that. I think I think we need to rethink expand the SBA. When we look at mortgage markets, which are deep and liquid and and largely standardized, we don’t have the same in small business financings, in part, because of we don’t have the same kind of secondary market mechanism to do that. So I think, I think we can think big. I think, in fact, you’ve got a, you know, a potentially very powerful political constituency that’s really being underserved, not just by sort of the financial system, but also by by the politics of the country at this time. And so I think, I think, you know, I think we can think big and bold about what needs to happen, and I hope that there is a movement to do that.

Louis Caditz-Peck  46:01

Thanks everyone. Let’s hear from the folks in the room what’s on your mind.

46:14

Good afternoon. [Cameron Dawes, the Milken Institute], what innovations and policies. Are you all seeing that are emerging, that are supporting small businesses in traditionally red states?

Ashley Urisman  46:35

In I’m sorry to clarify the question, in traditionally red states, states that lean politically red.politically red.

Ashley Urisman  46:53

I was just in Ohio, so we have a very wide coalition in our association, and that’s we. Those were not the issues that we were discussing in Ohio.

Louis Caditz-Peck  47:04

So two things come to mind. So on this issue of small business financial protection in particular, that really has been an issue that has gotten the attention of both Democrat and Republican politicians. So talking about red states, this summer, the state of Texas passed a bill trying to crack down on predatory lending the way that they conceived it. You know, candidly this that bill wasn’t a bill that RBLC was, was was driving or endorsed, but that was structured as a crackdown on merchant cash advance, as we shared earlier, you know, the perspective of the Responsible Business Lending Coalition is what’s important are that any type of financing is delivered with responsible practices. So that didn’t quite fit the way that we framed it, but that was, you know, something that united the whole Texas Legislature and was signed by Governor Abbott. Ultimately, it wasn’t, I don’t think, going to be an effective law, because it was focused only on merchant cash advance, and it was signed in June, and by July, they were advertising business as usual in Texas. They just restructured their products to be called loans. 

Louis Caditz-Peck  48:18

But Jesse and Ashley were talking about the testimony we gave in Tuesday, on Tuesday in Maryland, Steve was there for some of that really long hearing. This was a hearing on a small business Truth in Lending bill that started at one. The bill was 19th. It didn’t get called until 7pm and the sponsor of that bill is a Democrat, and by the time the bill got called, he had to leave to go chair another committee. And so a Republican colleague, who is also a small business owner, picked up the bill and presented it for him and said, it is a mystery to me why we don’t do this, and just within the Trump administration, you know, we had the chair of the FTC in his report to Congress, has talked about he sounded a lot like Karida, actually, about how small business owners are also consumers and are and that the FTC under under Chair Ferguson is doing work to protect small businesses from predatory financing. We’ve had the Small Business Administration under under the current administration, talk about how they also been really focused on on merchant cash advance structured products and and have actually banned SBA loans from being used to refinance people out of those because of concern that those product structures are leading to a very high fail rate by small businesses, and some strong language was thrown around by them. So this is an issue that brings everybody together, and so I’m glad you asked that question.

Louis Caditz-Peck  49:55

Let me just add, I mean, this is, this is not necessarily an innovation in the sense that it’s. New. But I mean the whole existence of the CDFI industry, which experiences bipartisan support, and which has been under attack recently, but continues to have bipartisan support in in blue and red states, some of you probably know there are more CDFIs in the state of Mississippi than there are anywhere else, I think, is what is, historically, one innovation. I mean, I see in more rural communities, and tends to be in more red states Pretty significant cooperative and collective financing arrangements. And I hear more I haven’t necessarily seen the seen the policy to back it up, but I hear more conversation about concern about corporate monopolies, with respect, in particular to agriculture, some of the finance and the ways in which farm equipment is financed than ever before. And I suspect that that will, in some way, shape or form, lead to political action at some point at the state level.

Louis Caditz-Peck  51:01

I think we probably have time for two more questions. One more question.

51:06

[Steve Schaff from Community Finance Academy], Karida, you had mentioned that you had done a crowdfund. Pretty successful. $100,000 is pretty impressive. If you had to do it all over again, would you have started with a crowdfund campaign first given what you lived through with a more conventional route.

Karida Collins  51:26

No, the crowdfund campaign was to raise money for charity, and it actually because it raised so much money so quickly, Go Fund Me was honoring me as a Go Fund Me hero, while simultaneously investigating me for doing they thought it was fraudulent, and I actually had to set it up so that the money didn’t go through me. It had to go directly from GoFundMe to Baltimore community foundation. I have always had this idea that I shouldn’t be asking the community for money for myself. It’s like, I just feel like, oh, I should be able to do this. I should be able to stand on my own. And you know, now I can see that that’s actually, that’s just okay, that’s bullshit. We all need each other, mutual aid community support. Like, now I’m there, but it’s still like, it’s hard for me to sort of be like, I need help. Can you help me?

Louis Caditz-Peck  52:35

But that’s what we’re all here to do.

Karida Collins  52:37

Gross.

Louis  52:38

Do you think there’s time for Nope, there’s not time for one more. There is time. Okay.

Eric Weaver  52:51

Eric Weaver, again, I carpooled with Louis out to the hearing in Annapolis on Tuesday, and talking to him was was both inspiring, because he’s doing great work, and a bit sobering, because he was explaining that, you know, what we’re doing with these TLA bills is great, and it’s gonna, you know, it can impact some of the lenders, but the biggest lenders, the Square, the Block Square, whatever it is, PayPal, they’re now. They all have bank charters now, and a bank charter, you know, gets you out of having to comply with state laws. It’s not that simple, but largely .So you know, we’re going to have to figure out how to somehow have these standards apply to banks, and that’s like a whole nother level of uphill battle. I don’t know if any of you have any thoughts on kind of how we address that.

Karida Collins  53:56

Personally, I’m looking for a way to be too big to fail.

Louis Caditz-Peck  54:02

Something I’ll just comment about this is, you know, for the most part, the challenge that folks have talked about on this panel so far with respect to banks and access to capital is the access the capital that banks are providing is really good, and it’s what people want to be able to access, and they want more of it. And so I think that a big policy goal is, how do we make that kind of capital more accessible? And I think it’s going to, it is going to be a challenge for the banking system, to the extent that the kinds of products that have drawn all of this scrutiny and concern move into the banking system, that’s going to make that’s going to bring up challenges for banks, for how do they distinguish themselves from that themselves from that, what kind of regulatory pressure it puts on all the banks. And so I hope there’s some kind of neat resolution to that.

Louis Caditz-Peck  54:49

It really highlights why we need a strong CFPB that is doing its job so many people in the room work to set up the CFPB, the CFPB. Was envisioned, of course, to address a series of challenges which were written into Dodd Frank, but also to think about emerging problems and challenges. And I think this is certainly one of them. And then, yes, we need at the federal level, APR disclosure as well. We need 1071, we need the data. And as Louis referenced, there’s, there’s not just, you know, there’s a there’s a large number of companies today coming in for bank charters. There’s been a wave of stable coin issuers coming in for a trust charter. There’s been sort of a surge of companies applying for an industrial loan Charter, which is sort of a limited purpose charter that gives them a lot of the benefits of the federal banking system without most of the obligations, protections, regulations, including sort of inadequate CRA obligations. So these are all things that you know we need to be active on, need to be vigilant on, NCRC has opposed almost every one of, certainly the stable coin charters and a number of the ILC charters. But for that very reason, we need strong federal standards laws. And, you know, we have an agency that was charged with, you know, protecting against those kinds of abuses, and that’s the CFPB, and we need a strong CFPB.

Louis Caditz-Peck  56:29

Okay, well, thanks everybody. I can’t believe how, how rich the all three of these conversations were, and I hope that there’s a lot of time for us to continue the conversation, one on one for the rest of the rest of the day for folks on the live stream, thank you, and let’s hear from you.

56:49

I didn’t realize you’re recording over there. Yeah, Jacob, come on up for some closing remarks.

Jacob Harr  57:08

Well, thank you. It’s been, it’s been a really, Louis, I couldn’t agree more. It’s been three fantastic conversations. And I’m Jacob Harr, I’m from Community Investment Management. We’ve been a rblc member going back to 2015 and one of the reasons that we we’ve all come together to work on this issue is because of how high stakes it is, right? And seeing these small business owners, and especially Karida and Rebecca up here today. Thank you for coming and sharing your stories. I think for all of us who work in small business, it’s so meaningful to hear your experiences. And you know it reminds us, Louis, like you shared your family’s small business story, Peter, you shared your small business story. Got me thinking about, you know, my father, my grandfather, my great grandfather, all small business owners, and I bet all of us here have that someone in our lives who’s been working hard to build that economic pathway for all of us. You know, as we just think about the conversation and try to summarize some of the points, you know, I think that what I heard and bringing it together is just look, access to capital has really improved over the last 10 years. That is clear, but outcomes for small businesses are still precarious. Right? The right kind of financing can be a lifesaver, but the wrong kind of practices can be a death sentence for small businesses. And carita, you really talked about a lot of those struggles, you know, and how much we need these tools to understand the options. With transparency and choice being fundamental for, you know, small business owners, the goals really do vary. Karina, you talked about small business owners being optimists. That that true, that that strikes true. And, you know, I think, Tim, you talked about how growth is generally something that small business owners are citing as a main motivator, whereas business ownership is not generally a pathway to generational wealth. You know, we heard about it as a lifestyle business, as a creative fulfillment area, or a reasonable career alternative for employment and and so much of the reality is, as you said, Karina, just keep it going like that is what you were doing day in and day out, and what is guiding a lot of that. But there are such significant gaps in data on small business with this 30 plus year old data collection infrastructure, and thinking about how we’re going to catch up our understanding of what business owners are experiencing and how we can measure outcomes, we’ve talked about 1071, and. Some of some of the efforts of trying to pull data together so that we can really understand that.

Jacob Harr  1:00:05

But you know, one of the things that I was inspired by was the panel that you moderated Peter talking about all the innovation and the role of AI and how, especially for the smallest and most vulnerable businesses, those types of tools are being adopted quickly and are so meaningful to help people understand their financials, some of the great work that high beam and parlay are doing, but also thinking about how these tools are enabling business creation. Joyce, the panel that you moderated, we talked about that right? Like businesses are forming at a much faster rate. A lot of that is help. Is helped by technology. I think at the end, the one thing to that sums up the day for me is that innovation is a mess, but yet here we are, and we keep going, and it’s what we need to do, and on the way that we believe innovation can be shaped to create the future we all want and we all want to live in, and we need such a diverse group of stakeholders, like those who are here in the room, those who are on the stage, and those who are out there.

Jacob Harr  1:01:16

And so one of the amazing things about the Responsible Business Lending Coalition is it brought together folks like Small Business Majority, representing all of these small business owners for profit, lenders, impact investors like us, nonprofits, conveners like Aspen Institute, CDFIs and so many different types of groups that all work across the sector to focus on practice, right? All of these products are needed. There’s not a single product or a single company that is necessarily toxic. It’s how they show up in people’s lives and the way that they’re giving that type of access. And you know, the same types of tools and products that Karida you spoke about, put you in a really tough situation, Rebecca also talked about, is being a lifesaver because of the way that it helped build resilience. And so it is complex and it is messy, and so I hope that all of us can come together partner to ensure that we are seeing, in fact, guardrails so that these products and these innovations can become productive, and the value that is being generated in our world is being done from the economic success of small businesses and the communities they serve. And that’s really the foundation of where this whole chain of finance can work really well when there’s value creation that’s coming at the small business level, at the community level, and we all get to participate and encourage that through the innovation that’s being created. So thank you so much for being here. It was a great day.

Joyce Klein  1:02:53

Well, with that, I just want to add my thanks to Jacob, to all of you for being here. Want to do some quick thanks to the all of the rblc members and those who have contributed to today’s event. Jacob, as the sponsor, Small Business Majority was a key member of our planning committee. So that was that was fantastic, Peter, for your moderation today and your help with the session, as well as our fantastic EOP and Aspen Institute team, who really support us great and are and are fantastic on these events. So So thanks to everyone. It’s now time for a reception, so back where we had snacks before, please join us and hang around and continue the conversation and thank you.