At a public symposium last week, academics, market participants and policy-makers gathered to discuss the hurdles and goals of an effective implementation of section 1071 of the Dodd-Frank Act, which would increase public data about small business lending, specifically those owned and operated by women and minorities.
“We know the data collection rule is something that has been on a lot of your minds for some time now,” said Consumer Financial Protection Bureau Director Kathleen Kraninger.
The law specifically instructs the bureau to develop a rule for the collection, reporting and publication of certain data concerning credit applications of the small businesses.
Kraninger acknowledged the expressed concern about the implications of such a statute regarding the potential burden to small entities, possible curtailment of credit and privacy considerations. “We know that a rule needs to be done with great care and consideration in order that the rule not impede the ability of small businesses — including minority and women-owned small businesses — to access the credit they need,” Kraninger said.
These businesses, Kraninger said, are critical engines for economic growth, and are estimated to yield a $1.4 trillion small business lending market. According to the Census Bureau, there are more than 27.6 million small businesses in the United States — 7.9 million of which are minority-owned and 9.8 million women-owned.
“To contribute meaningfully to the U.S. economy, small businesses — including minority- and women-owned small businesses — need access to credit to smooth our business cash flows and to enable entrepreneurial investments that take advantage of, and sustain, opportunities for growth,” Kraninger said.
The symposium discussed the legal definition of a small business, what data points are important to collect, and what information lenders are currently using to evaluate credit to small businesses, along with other issues surrounding the section 1071 provision.
“We have a great need to understand more about the small business financing market, the products that are offered to small businesses, and the financial institutions offering the credit,” Kraninger said.