2014 CD Perspectives Report

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Federal Reserve Community Development Perspectives • increasing the capacity of funding and technical assistance providers and fostering effective collaboration across these groups; • enhancing the availability of credit and capital for small businesses by informing financial institutions of opportunities, particularly those that may be eligible for consideration under the Community Reinvestment Act (CRA); and • building a deeper understanding of small business trends and conditions through a range of polling, research, and outreach initiatives. Background Small businesses and microenterprises are a critical source of employment and economic strength, especially for lower- income communities, and play a vital role in communities by offering products and services that help sustain neighborhoods. They also can provide economic independence and self-sufficiency for their owners. Yet some small businesses continue to struggle in the wake of the recession. As noted in "Why Small Business Lending Isn't What It Used to Be," overall small business lending activity remains below prerecession levels. The slowdown in the economy reduced small businesses' sales and earnings, which translated into reduced loan demand for many businesses both large and small. Key credit factors such as collateral values and borrower credit scores also have affected small businesses' ability to borrow. With real estate values recovering unevenly, particularly in lower-income communities, adequate collateral values will continue to be an important factor for access to capital for small businesses. Another key issue for small businesses is whether to consider alternative lending options from sources other than traditional financial institutions. Resources for small business supporters and lenders A key challenge to improving the availability of credit and information for small businesses is the need to foster better coordination across the array of small business technical assistance providers, lenders, and other support organizations. In 2013, several Reserve Banks hosted events and shared resources to help financial institutions and nonprofits better understand the range of public-sector small business lending programs and to use entrepreneurship and small business development to suppor t local economic growth. CD staff also worked with federal banking regulators to host programs for CRA officers to explore CRA-eligible lending, investment, and service opportunities that support small businesses. Small Business The Federal Reserve's small business focus area helps communities by working with intermediaries to support small businesses and microenterprises. Community development (CD) staff around the country support a range of activities, including: 20

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