Hickenlooper Knows How Hard It Is To Get A Loan For A New Business. His First Bills As A Senator Aim To Make It Easier For Others
When John Hickenlooper first opened the Wynkoop Brewing Company in 1988, it was a loan that made it possible. But he wasn’t handed a loan by the first bank he went to.
“I got turned down by 33 banks,” he said.
The Women’s Bank, founded in the late 70s to support women and other people overlooked by traditional lenders, was the only bank willing to give him a loan. Now, in his first set of bills as senator, he’s working to make it easier for small businesses to get the loans they need.
“During the COVID pandemic, we saw with clarity that many small businesses, truly small businesses and businesses in rural areas, owned by women or minorities suffered worse than other businesses,” he said. “I've been looking at this for years, this decline in the number of people starting small businesses.”
On Thursday, Hickenlooper introduced four bills. If passed, they would make it easier for women and Black, Latino or Native American people to become investment managers, ensure Native American owned businesses are represented equally in the Small Business Association, allow cooperatives to get loans they otherwise could not and increase loan amounts for businesses switching to renewable energy.
Two of the bills have bipartisan support, and Hickenlooper is optimistic all four will pass and gain wide support.
If the bills do pass, outreach will be critical, said Lindsey Vigoda, Colorado director of Small Business Majority.
“Doing greater outreach to let entrepreneurs who aren't usually targeted know that this is a loan that they can access. This is a loan that will benefit their business,” she said. “But the folks who need the most education on that isn't necessarily the entrepreneurs themselves. It's the folks who are talking to the entrepreneurs.”
The financial institutions and nonprofits who provide the loans are the ones who need to be educated, Vigoda said, to ensure the loans get into the hands of the people they’re intended for.
OK, so here are the bills
MicroCapSBIC Designation, with Sen. Jim Risch (R-Idaho)
The SBA operates a program called the Small Business Investment Company. It requires that investment firms be licensed through the SBA, and the goal of the program was to improve small business access to capital. But there’s a problem, the majority of venture capital funding is invested in three cities: Boston, New York and Silicon Valley, and 93 percent of that funding is controlled by white men. The result, according to Hickenlooper, is that a tiny fraction, about 3 percent, of venture capital funds land in the hands of Black and Latino founded companies.
The new bill creates a “MicroCapSBIC,” which is an entry-level license designation in the program. So people with less or no experience in managing investments, but do have solid business experience could become investment managers. From there, the loans these new managers give out would have to go to smaller enterprises, a quarter of which would be in rural and underserved communities.
“I believe it's fair to say that they will do a very good job of assessing the credit worthiness of an applicant,” Hickenlooper said. “Especially when you're looking at giving loans to Native Americans, many of them are tribal businesses on reservations. It allows them more of an equal footing.”
Just like The Women’s Bank gave Hickenlooper a shot all those years ago, people with more diverse backgrounds would be better suited to take chances on businesses that other lenders may not, Hickenlooper said.
“Entrepreneurs need this type of support, especially entrepreneurs of color as a result of COVID,” said Vigoda. “Even before, entrepreneurs of color really do face barriers to their experience that simply white entrepreneurs don't face. Particularly in discrimination of access to capital as well as business supports.”
SBA Office of Native American Affairs Enhancement and Modernization Act, with Sen. Cynthia Lummis (R-Wyo.)
The SBA has an office dedicated to support Native American entrepreneurs, but there’s a caveat: That office doesn’t have an associate administrator like other similar offices in the association. Plus, the SBA Office of Native American Affairs is underfunded, according to Hickenlooper.
So his solution is to create an associate administrator position to provide a seat at the table to set the direction and priorities of the Office of Native American Affairs and double its funding.
Vigoda says this is a good step, but “is that enough to really make a splash for Native American entrepreneurs who have historically and systemically been left out of the picture?” she said.
Capital for Cooperatives Act
There are nearly 30,000 cooperatives in the U.S. that generate $500 billion in revenue and more than $25 billion in wages, according to research conducted by the Hickenlooper team. Cooperatives are organized, owned and governed by the people that use them and work for them. Unlike other businesses, cooperatives can’t access the SBA’s primary business loan, called a 7(a). That’s because those loans require a personal guarantee, which allows a lender to go after your personal assets to repay the loan if your business assets don’t cover it. Workers in co-ops can’t offer up personal guarantees because everyone owns the business, no one person is liable.
“Sixty percent of the owners of worker cooperatives are either Latinos or African Americans, the very communities that have had difficult time getting access to sufficient loans and capital to be able to expand their businesses,” Hickenlooper said.
The Capital for Cooperatives Act would amend the criteria so a cooperative's equity, cash flow and profitability, rather than a personal guarantee, would be used as the lending criteria. The bill would also allow the SBA to establish new lending criteria altogether for cooperatives to better serve them.
“I think that this is a vital piece of legislation,” Vigoda said. “The idea of increasing the number of co-ops increases the number of minority-owned businesses, which is something we absolutely want to see.”
She said it will be important to do robust outreach to ensure that not only cooperatives know they will not be eligible for this loan, but that they also know they have to have proper designation as a co-op to be eligible.
Green Energy Loan Enhancement Act
This bill is the most straight-forward of the four. Currently, if a business wants to expand and get a loan to do so from the SBA, if they make energy efficient investments during the expansion, then they qualify for a bigger loan. This new bill raised that loan cap from $5.5 million to $10 million.
Eligible expansion projects must either reduce the businesses’ energy consumption by at least 10 percent or generate more than 15 percent of the energy used by the business.
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