Common Capital President Raymond Lanza-Weil implores the U.S. Senate Committee on Small Business and Entrepreneurship to maintain a pilot lending program that he claims has been a game changer for small businesses and entrepreneurs.
Screen capture courtesy of U.S. Senate Committee on Small Business and Entrepreneurship.
SPRINGFIELD — Springfield-based nonprofit Common Capital has provided over 900 loans totaling over $35 million to small businesses in Western Massachusetts since its inception in 1990, leading to the creation or retainment of 2,200 jobs.
A portion of those loans, around 34%, come from the Small Business Administration’s Community Advantage program, a federal pilot lending program that serves small business owners in underserved communities, and provides capital for people who have difficulty securing it elsewhere.
Without the program, low-to-moderate small businesses and entrepreneurs could suffer.
Common Capital President Raymond Lanza-Weil was invited to a U.S. Senate Committee on Small Business and Entrepreneurship hearing at Capital Hill on Feb. 26 by U.S. Sen. Ed Markey (D-Malden) to explain why SBA’s Community Advantage program benefits his organization, which serves as the leading SBA micro lender and SBA community advantage lender in Massachusetts.
The nonprofit, a subsidiary of Way Finders, is a community development financial institution, according to its website, that offers free business advice and loans to small businesses that are unable to access capital from conventional sources.
In his remarks to the committee, Lanza-Weil said approximately 87% of Common Capital’s Community Advantage program dollars are loaned to businesses owned by people with low to moderate income or located in LMI census tracks.
He added that 73% of these program dollars are loaned to startup businesses, 47% to women-owned businesses and 17% to veteran-owned businesses. Any rollback of this program would negatively impact Massachusetts small business owners in these demographics, according to Markey and Lanza-Weil.
“The Community Advantage program helps us fulfill our mission of creating economic opportunities for people with low to moderate income by increasing access to capital for the small businesses they own,” Lanza-Weil said. “Our continued success, and the success of the small business community in Western Massachusetts, depends upon the availability of SBA Microloans and the SBCA program.”
Some Senate committee members, however, may want to rollback this access to this capital. U.S. Sen. Joni Ernst (R-Iowa) was more hesitant to favor the Community Advantage program during the hearing because she argued that the Biden administration’s expansion of the program and loosening of its rules has increased the risk of default for American taxpayers. She said these changes have also led negative cash flow.
“These new rules also opened the door to foreseeable fraud by enabling a potentially unlimited number of unregulated non-depository institutions to become permanently licensed SBA lenders as small business lending companies or SBLCs,” Ernst said. “This program was designed to operate with zero subsidy, and I worry we are on the cusp of forcing taxpayers to foot the bill, something we should avoid at all costs.”
Markey disagreed with Ernst’s arguments, saying that the Biden administration maintained a healthy SBA 7a program and ensured that 99% of loans were paid back.
In his opening remarks to the committee, Markey said that for 70 years, the SBA’s flagship 7(a) lending program has provided government-backed loans to small business owners who are ineligible for a conventional loan, and argued that without a program like the Community Advantage one, traditional banks would lend to the “biggest, safest businesses” in town while deeming loans to the smallest businesses as too risky.
He noted that the Community Advantage program provided 53% of loans to start-ups and 43% of loans to entrepreneurs of color in fiscal year 2024.
“SBA has a responsibility to address the inefficiencies in private lending to support true competition,” Markey said. “It is the government’s responsibility to make sure that there is capital for all entrepreneurs, regardless of their background.”
The Massachusetts U.S. Senator commended places like Common Capital for its work in providing small dollar loans to small business owners that struggle and said the 7(a) program has helped create 886,000 jobs across the country.
West Springfield business
Mayrena Guerrero used a Community Advantage program loan of $300,000 from Common Capital to launch Colorful Resilience, a West Springfield-based mental health clinic that provides outpatient mental health services to people of color, the LGBTQ+ community, immigrants, first-generation people and other allies.
Before starting the clinic, Guerrero said she had trouble finding funding until a bank told her about Common Capital. She said Lanza-Weil’s organizations helped her secure an SBA Community Advantage loan for $250,000 and a $50,000 microloan at a six-year term and a 7.5% interest rate.
In addition to the loans, Common Capital helped Colorful Resilience with marketing and technical assistance, Guerrero said during her own testimony in front of the Senate committee.
Now, three years after becoming a registered business, Colorful Resilience is a profitable company that employs 15 people, has 550 active clients, and is the 27th largest LGBTQ-owned business in the state. Guerrero said that without the relationship with Common Capital, she would have had to rely on a predatory lender, and her business would probably not exist.
“Businesses like Colorful Resilience keep the American economy going in the right direction,” said Guerrero. “The truth is that I really don’t know how we would exist as a business if Common Capital and the SBA Community Advantage Loan Program was not available to us.”
Lanza-Weil said that Guerrero is an example of how Common Capital functions as a “high-touch lender,” where it is all about building a relationship with an applicant. He said that more conventional lenders sometimes lose sight of that.
“The way we mitigate risk in a community development financial institution is with hands-on business assistance and training,” Lanza-Weil said. “By making Mayrena a better businessperson, she’s also a better mental health counselor and has a more sustainable and viable business in the long term.”
With that positive relationship in mind, Guerrero and Lanza-Weil are now hoping that the Community Advantage program is maintained and expanded to help the populations across the country that need it.
“I urge you to continue supporting the Community Advantage program, and to expand it so that more mission-focused lenders like Common Capital can increase access to capital for low-to-moderate income and low-wealth entrepreneurs,” Lanza-Weil said.
