Bill Overview
Title: Strengthening Community Business Development Act
Description: This bill expands the factors allowed to be considered by a supervising agency when evaluating a financial institution's compliance with community reinvestment standards. Specifically, the bill allows a supervising agency to consider the efforts of a financial institution that deny business loans to low- and moderate-income borrowers to refer these borrowers to community business development organizations or to provide these borrowers directly with business development resources.
Sponsors: Sen. Hassan, Margaret Wood [D-NH]
Target Audience
Population: Low- and moderate-income borrowers seeking business loans
Estimated Size: 5000000
- The bill affects financial institutions' evaluation criteria, particularly in relation to their ability to deny loans but refer denied applicants to alternative resources.
- Low- and moderate-income borrowers are impacted as the bill directly addresses business loan evaluations for these groups.
- The bill encourages financial institutions to refer denied borrowers to community business development organizations, impacting both the borrowers and these organizations.
- Community business development organizations will receive increased referrals, impacting their operations and potentially increasing their client base.
- Financial institutions are stakeholders as their compliance evaluations may change based on their referral activities.
Reasoning
- The policy is intended to support low- and moderate-income borrowers seeking business loans who might be denied by traditional financial institutions. These borrowers could benefit from increased referrals to community business development organizations, potentially resulting in more support and resources to start or maintain their businesses.
- The policy could lead to increased workload and resource demand on community business development organizations as they handle more referrals. This could affect their capacity to support each client effectively, depending on how well they are supported by the policy.
- Given the budget constraints, the policy is likely to have medium to high impact on individual borrowers who receive support but may not cover all potential applicants due to budget limitations.
- The direct impact on financial institutions relates to how their compliance is evaluated based on these referrals, which could indirectly affect their lending practices but does not provide direct financial incentives for individual employees.
- The timeframe of impact is immediate to medium-term (1-5 years) based on the implementation of new evaluation criteria and the capacity of community businesses to adapt to increased demand. Longer-term effects depend on sustained policy support and budget increases.
Simulated Interviews
aspiring entrepreneur (Atlanta, GA)
Age: 42 | Gender: female
Wellbeing Before Policy: 4
Duration of Impact: 5.0 years
Commonness: 14/20
Statement of Opinion:
- I hope this policy will help me get the guidance and support necessary to finally get my business off the ground.
- Banks have always turned me away due to my income level, so I think having alternative resources would be a big help.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 5 | 4 |
| Year 2 | 6 | 4 |
| Year 3 | 7 | 4 |
| Year 5 | 8 | 3 |
| Year 10 | 7 | 3 |
| Year 20 | 7 | 3 |
small business owner (Detroit, MI)
Age: 30 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 3.0 years
Commonness: 12/20
Statement of Opinion:
- Access to community development resources could help me refine my business plan and access necessary funding for expansion.
- I'm concerned about how well-equipped these organizations are to handle increased demand.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 7 | 4 |
| Year 5 | 6 | 4 |
| Year 10 | 5 | 3 |
| Year 20 | 5 | 3 |
tech startup founder (San Francisco, CA)
Age: 38 | Gender: other
Wellbeing Before Policy: 6
Duration of Impact: 2.0 years
Commonness: 7/20
Statement of Opinion:
- Referrals to development organizations might help me find the mentorship and investors I need.
- This policy feels like a step in the right direction, but it's vital that these organizations have proper resources.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 6 |
| Year 2 | 7 | 5 |
| Year 3 | 6 | 4 |
| Year 5 | 6 | 3 |
| Year 10 | 5 | 3 |
| Year 20 | 4 | 3 |
business consultant (New York, NY)
Age: 55 | Gender: female
Wellbeing Before Policy: 7
Duration of Impact: 10.0 years
Commonness: 10/20
Statement of Opinion:
- This policy could increase our client base significantly, which is both exciting and challenging if resources do not expand.
- We need to ensure that each organization is equipped to handle increased referrals effectively.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 8 | 6 |
| Year 3 | 8 | 6 |
| Year 5 | 8 | 5 |
| Year 10 | 8 | 5 |
| Year 20 | 7 | 4 |
recent college graduate (Houston, TX)
Age: 22 | Gender: male
Wellbeing Before Policy: 5
Duration of Impact: 5.0 years
Commonness: 15/20
Statement of Opinion:
- I worry about the initial rejection but knowing there's a support system is reassuring.
- These measures seem tailored to help people in situations similar to mine. It's encouraging.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 4 |
| Year 3 | 8 | 4 |
| Year 5 | 8 | 3 |
| Year 10 | 7 | 3 |
| Year 20 | 6 | 3 |
local bookstore owner (Chicago, IL)
Age: 47 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 3.0 years
Commonness: 13/20
Statement of Opinion:
- It's great that more people like me can get guidance, but I hope these organizations are ready.
- I've often found banks unreceptive to small business needs. Referrals could change that.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 6 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 5 |
| Year 10 | 6 | 4 |
| Year 20 | 5 | 4 |
community banker (Rural Iowa)
Age: 60 | Gender: male
Wellbeing Before Policy: 7
Duration of Impact: 2.0 years
Commonness: 20/20
Statement of Opinion:
- This policy might change how we approach loan denials, focusing on community benefit.
- We need to carefully balance referrals with privacy and respectful denials.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 7 | 7 |
| Year 2 | 7 | 7 |
| Year 3 | 7 | 7 |
| Year 5 | 7 | 6 |
| Year 10 | 7 | 6 |
| Year 20 | 7 | 6 |
freelance graphic designer (Los Angeles, CA)
Age: 29 | Gender: female
Wellbeing Before Policy: 5
Duration of Impact: 4.0 years
Commonness: 16/20
Statement of Opinion:
- Referral-based support could really help launch my business if traditional loans fail.
- Building a support network is essential, and this policy hints at that necessity.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 5 |
| Year 2 | 7 | 5 |
| Year 3 | 8 | 4 |
| Year 5 | 7 | 4 |
| Year 10 | 6 | 3 |
| Year 20 | 5 | 3 |
self-employed mechanic (Phoenix, AZ)
Age: 36 | Gender: male
Wellbeing Before Policy: 6
Duration of Impact: 3.0 years
Commonness: 14/20
Statement of Opinion:
- If community organizations can help with planning and financing options, it could be a big win for my business.
- This policy should prioritize direct loan support as well – not just referrals.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 6 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 6 | 4 |
| Year 10 | 6 | 4 |
| Year 20 | 6 | 3 |
restaurant owner (Miami, FL)
Age: 50 | Gender: female
Wellbeing Before Policy: 6
Duration of Impact: 2.0 years
Commonness: 11/20
Statement of Opinion:
- I appreciate any policy that aims to support businesses like mine that are asset-light but community-rich.
- Referrals must translate into actionable support to be effective.
Wellbeing Over Time (With vs Without Policy)
| Year | With Policy | Without Policy |
|---|---|---|
| Year 1 | 6 | 6 |
| Year 2 | 7 | 5 |
| Year 3 | 7 | 5 |
| Year 5 | 7 | 4 |
| Year 10 | 6 | 4 |
| Year 20 | 5 | 3 |
Cost Estimates
Year 1: $15000000 (Low: $12000000, High: $18000000)
Year 2: $15000000 (Low: $12000000, High: $18000000)
Year 3: $15000000 (Low: $12000000, High: $18000000)
Year 5: $15000000 (Low: $12000000, High: $18000000)
Year 10: $15000000 (Low: $12000000, High: $18000000)
Year 100: $15000000 (Low: $12000000, High: $18000000)
Key Considerations
- The readiness and capability of community business development organizations to handle increased referrals and support requirements.
- The potential for decreased loan denial rates given improved borrower preparation might vary significantly across regions.
- Financial institutions may face challenges in aligning existing processes with new compliance evaluation criteria.