New Paper: CRA Small Business Lending And Employment

Posted by on September 10, 2010

Small businesses are the driving force behind job creation, yet many struggle to find the capital they need to survive and grow. Women and minority-owned businesses face additional impediments. Today, we’re pleased to announce a new National Community Reinvestment Coalition (NCRC) study, “Does CRA Small Business Lending Increase Employment: an Examination on a County Level.”

The study looks at over 500 counties around the country, exploring the national impact of the Community Reinvestment Act (CRA) on small business lending (CRA motivates banks to make loans to small businesses by examining the extent to which banks are making loans to small businesses). The study can be downloaded at: http://bit.ly/9iYAqC.

Study Findings

The study shows a positive correlation between small business lending and employment. The study also reveals troubling racial inequalities in small business lending. In fact, our analysis finds that counties with greater percentages of minorities had lower rates of small business lending and employment.

The NCRC study looked at 2006 lending data for dozens of counties around the country. Some of the specific findings in NCRC’s study include:

* There is a positive correlation between small business lending and employment; the more small business lending in a county, the higher the employment rate.
* Almost 55 percent of the small businesses studied received loans in counties with less than 20 percent African Americans. This ratio declined to 48 percent in counties with 30 percent or more African Americans, on average.
* Employment rates are lower in counties with higher percentages of minorities and African Americans. The average employment rate is 2 percentage points higher for counties with less than 20 percent African Americans than in counties with more than 30 percent African Americans.

If you have any questions about the study, please feel free to contact , Josh Silver, NCRC Vice President of Research, at 202-628-8866.