Eight thousand small businesses across the country seek credit and are denied each day. Yet, small businesses are vital to driving America’s economy forward: creating jobs and building economic opportunity for the families who run them. And so, Opportunity Fund is now offering loans online to borrowers in 12 new states, in addition to increasing our investments in California’s small businesses.
Opportunity Fund will reach borrowers in these new states online by expanding a referral partnership with Lending Club, the world’s largest online credit marketplace connecting borrowers and investors, pursuing a branchless banking model that embraces the best of online and traditional community lending. This expansion comes at a time when Opportunity Fund is also deepening our impact within California. Over the coming years, Opportunity Fund will add lending staff in new regions of the state (Fresno, Sacramento, and San Diego), and continue to reach more California borrowers online as well.
“It’s thrilling to be able to reach so many more underserved business owners pursuing their dreams,” said Eric Weaver, Founder and CEO, Opportunity Fund. “We have received online inquiries and phone calls from entrepreneurs outside of California for years, and the rate is only increasing as our lending grows. Opportunity Fund plans to invest $400 Million in over 9,000 small businesses by 2020, which will more than double our annual impact. It’s only possible by pursuing innovative strategies and forging strong collaborations outside of our sector.”
Access to capital for entrepreneurs plays a key role in economic mobility, job creation, and the health of the middle-class, but bank lending to small businesses has been slow to recover from the 2008 recession. According to FDIC data, while bank commercial loans of $1 million or less have increased by 5% over the past year, this comes after a period of protracted contraction: small business credit now represents just 20% of all commercial credit, down from 35% in 2004. The recovery started later and has been slower than other markets.
Minority communities and women entrepreneurs are particularly underserved, exacerbating disparities in wealth and opportunity. And while new ‘Fintech’ lenders have poured billions into a new online loan industry, borrowers are often saddled with debts carrying an average APR of 94% and payments that are more than twice what the business can afford, according to Opportunity Fund’s own research.
Rich Foreman owns Dynamite Pest Control in Philadelphia, PA. It’s a second generation, family-run, and African-American-owned business. Rich borrowed $20,000 from Opportunity Fund, after being referred by Lending Club, to purchase new equipment as his business grows. Dynamite Pest Control is one of the first businesses funded through Opportunity Fund’s geographic expansion outside of California. “Jobs are few and far between. As an entrepreneur, I can invest in myself and do something I enjoy while supporting my family,” said Foreman. “This business means everything to us.”
Opportunity Fund’s collaboration with Lending Club began as a pilot in California in 2016, funded by JP Morgan Chase through the bank’s PRO Neighborhoods initiative. The partnership leverages Lending Club’s technology platform to identify small business owners whose credit applications fit Opportunity Fund’s guidelines (and do not meet Lending Club’s credit criteria) so that Opportunity Fund can fund qualifying entrepreneurs, thereby expanding access to credit in underserved communities. The goal is for these small business owners to gain access to affordable credit, as well as expert advice and support from Opportunity Fund’s dedicated staff.
The partnership will now expand into Florida, Georgia, Illinois, Michigan, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Texas and Washington. In the Pacific Northwest, Craft3 – the leading CDFI in the region – will buy loans from Opportunity Fund and may establish an ongoing relationship with qualified borrowers in the region acquired through the partnership. Opportunity Fund will seek similar partnerships with community lenders in new territories as it expands in the coming months.
As the need to invest in underserved entrepreneurs increases, Opportunity Fund will grow to offer loans and advice to more entrepreneurs across the country and throughout California – because we believe in the power of saying “Yes” to someone’s dream, so they can build a business and create a life of dignity that is filled with opportunity.
 “Unaffordable and Unsustainable: The New Business Lending on Main Street.” Opportunity Fund, 2016.