Fresno near-last in ranking of small business lending, new study shows

A new analysis of the 100 largest cities and counties in the U.S. shows that when it comes to small business lending, Fresno comes in at almost dead-last.

In an April report on investment patterns from the Urban Institute, researchers found that Fresno County and the city of Fresno ranked second and third from last, respectively, on loans to small businesses compared with other large cities and counties across the country.

The report also noted racial and geographic disparities in small business lending, showing that investments were clustered in the northern and eastern parts of the city and favored census tracts where less than 20% of the population was Hispanic.

These findings didn’t come as much of a surprise to local experts who said there’s a chasm between how much capital small businesses in Fresno have asked for compared with how much they’ve received – the likes of which are estimated to be in the billions.

“It’s not like we just need a few dollars here in Fresno and that would fill the gap,” said Tate Hill, president of Central Valley mission lender Access Plus Capital. “No, there’s a significant gap.”

Hill’s organization helped produce a December 2022 study which estimated the amount of unmet financing demand from small businesses in Fresno County at $3 billion. The gap was even more pronounced for businesses owned by people of color.

The barriers to accessing capital stem from a variety of factors, local leaders say, including anything from a lack of community banks in south Fresno to inadequate business coaching resources in languages other than English.

“While the Urban Institute’s research is alarming, it is not surprising as we witnessed this divide during COVID-19, when many local minority-owned businesses struggled to secure Paycheck Protection Program loans due to a lack of access to conventional lenders,” said Will Oliver, president of the Fresno County Economic Development Corporation, in an email.

Despite these barriers, experts praised Fresno’s network of “mission lenders” who are helping lead the charge to ensure underserved populations gain access to small business loans.

“That’s something that should be treated as an accomplishment,” said Noah McDaniel, a research analyst at the Urban Institute and one of the co-authors of the study.

“In many places around the country and particularly in Fresno, we see that those investments are often going towards the communities where they’re needed,” he added, “in high poverty areas that aren’t receiving a lot of attention from more mainstream investors and capital sources.”

How the Urban Institute created a snapshot of Fresno’s small business lending

The Urban Institute, a public policy think tank in Washington, D.C., analyzed over 10 years’ worth of census data between 2010 and 2022 to produce the new report.

Researchers drew upon multiple sources to compile the small business rankings, McDaniel said, including data from the U.S. Small Business Administration’s 7(a) and 504 loan programs and from mandatory reports required of some banks through the Community Reinvestment Act.

The study doesn’t capture small business loans made through “fintech lenders,” which refers to financial firms that operate online, McDaniel added.

Why Fresno entrepreneurs struggle to secure small business loans

Hill said that a recurring barrier to accessing capital he’s observed in his work at Access Plus Capital is that people don’t have existing relationships with a local bank.

“That availability of access to the bankers, where you’re able to build a relationship with the bank,” he said, “makes a difference.”

That issue is more pronounced in some parts of Fresno than in others.

“If you look in south Fresno, I mean, outside of downtown itself, there’s only a handful of banks,” he added.

There’s a need for more technical assistance in Fresno as well – meaning business coaching and support with developing a business plan and getting ready to even apply for a small business loan.

That assistance needs to be available in multiple languages, said Dawn Golik, director of the Fresno SBA district office.

“We do events and outreach in Spanish, which I think is very important here in the 15-county San Joaquin Valley and Central Coast region that we serve,” she said, “which has a very large Spanish-speaking population.”

Mission lenders and Community Development Financial Institutions like Access Plus Capital have unique offerings to help serve clients that might otherwise struggle to access capital, including a lower credit score requirement.

Other CDFIs that serve Fresno-area clients include the Fresno Area Hispanic Foundation, CDC Small Business Finance, and Accion Opportunity Fund.

But a handful of mission lenders can’t make up for a $3 billion gap in small business financing on their own, Hill stressed.

A “one-size-fits-all” approach won’t work either, he added, because while some entrepreneurs may need $50,000, others might need hundreds of thousands of dollars to buy their building or open a second location.

“There has to be this ecosystem of support,” he said.

“There’s no one entity, no one bank is going to do all of that lending. It needs to be a combination of entities.”