Providing Loans to Entrepreneurs Benefitting Low Income Communities

This solution addresses finding loans for businesses that don't fit traditional lending profiles in California (primarily Bay Area) for small businesses who also are located in or are hiring from low income communities

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Problem Description

This solution addresses a need for capital for businesses in their second stage of growth, who are not qualified for traditional loans from banks or the Small Business Administration. The problem with loans given out by the SBA is that often they require just as stringent criteria as normal banks. A nonprofit called Pacific Community Ventures developed their Small Business Loan program to bridge this gap. In addition to targeting these businesses, PCV also is a qualified CDFI meaning that most of their loans are targeted at businesses that are based in or hiring from low income communities. The borrowers of PCV small business loans are 50% female and 56% people of color. The loan program also offers hands-on business advising through a established community of experts via the in-house website https://businessadvising.org/.

Building Blocks

Story

When PCV started its small business loan program, the goal from the outset was to provide loans to an important market segment of entrepreneurs who have been neglected by traditional finance mediums. PCV loans are distributed according to specific income and demographic criteria, but at the core of this is a deep belief in the mission of the organizations that are lent money. PCV has taken many steps to provide hand-on guidance for their borrowers and because of this they have never once dealt with late payments. In 2015, their borrowers led to a 20% increase of job growth in their communities, compared to the CDFI and national average of 3% and 2% respectively. Two of their loan recipients even became credentialed enough to be eligible for loans from traditional banks. Growing constantly, in 2016 the the program anticipates 20 loan recipients.

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Social Progress Index

  • Access to Advanced Education - Do people have the opportunity to achieve high levels of education?
  • Tolerance and Inclusion - Is no one excluded from the opportunity to be a contributing member of society?
  • Sustainable Development Goals

    On September 25th 2015, countries adopted a set of goals to end poverty, protect the planet, and ensure prosperity for all as part of a new sustainable development agenda. Each goal has specific targets to be achieved over the next 15 years. This solution covers the following goals:

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    Organizations Involved

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    Solution Stage

    One of the 7 stages of an innovation. Learn more
    STAGE SPECIALIST SKILLS REQUIRED EXAMPLE ACTIVITIES RISK LEVEL AND HANDLING FINANCE REQUIRED KINDS OF EVIDENCE GENERATED GOAL
    Growing scaling and spreading6
    Strong leadership, management, implementation skills
    • Business or organisational growth
    • Franchising
    • Licensing
    • Legislation
    • Spreading ideas
    • Transferring practice
    • Fidelity assessments may be important
    • Strong capacity needed to ensure transfer of practice
    MEDIUM
    • Equity, loans, payment by results, social impact bonds
    HIGH
    Evidence derived from evaluations in multiple sites, and independently run randomised control trials
    Innovation or impact at scale

    Key Details

    Social Progress Index
    Access to Advanced EducationTolerance and Inclusion
    Sustainable Development Goals
    E logo no un emblem 8eb007fb52bcaf000f4279f89616e9fb7a612a3d1273e67e39c924fffe1e2597E sdg goals icons individual rgb 08 0af7e046e005e6e7fcfebc9893441cac21efd84bda134e4d5e9b7035571d99fbE sdg goals icons individual rgb 10 0945d37c612a698dda60bd327b8a5b7ee6063e7fa624c0de3df103d323834574E sdg goals icons individual rgb 11 cffb0e7bb2eba66efe6ff5cdb41c018a1bba145e7716ecde676baec1e8b3abb6
    Activity