Gabriel Villarreal of Opportunity Fund, a Small Business Borrowers’ Bill of Rights (BBoR) founder and member of the Responsible Business Lending Coalition (RBLC) sat down for a conversation with Everett K. Sands, co-Founder and CEO of Lendistry. The organization became a Signatory of the Rights in 2017.
 
Lendistry Cofounder and CEO, Everett K. Sands, understands the challenges entrepreneurs face in accessing capital.
 
In 2014 Everett was working at a large bank that, despite its large loan volume, was still turning down a considerable number of small business loan applicants. The bank’s strategy for expanding its commercial loan activity was to purchase loans from community banks. However, this initiative coincided with a decrease in the total number of community banks due to a series of mergers and acquisitions. This meant fewer community banks doing small business lending and fewer loans for larger banks to purchase, creating a critical market gap for underserved small business owners. This is where Lendistry comes in.
 
Providing loans in the range of $50,000 to $2,000,000, “The back of the envelope business plan was to create an alternative financing company that could serve this market and have larger banks purchase our loans,” says Everett. In this way banks would be able to better fulfill their community obligations and underserved entrepreneurs would have the capital they needed to grow their businesses. Partnering with a community bank at the outset, which was later acquired, Lendistry became a CDFI in 2016 so it could partner with larger financial institutions from a funding perspective and continue to serve their community.
 
The company’s youth and community focus are Lendistry’s strengths. “Our successes and challenges go hand in hand,” says Everett, “Our youth in this industry means we’re open to change and innovation. One of our biggest successes is the unique team we’ve built. We’ve drawn people from the banking world and people who care about the community in a broad sense. We speak eight languages from Spanish to Korean, and this separates us from the norm.” This openness to innovation extends to the way Lendistry leverages technology. “Lendistry has built our lending platforms from scratch atop of more traditional processes, like making SBA loans smoother and more user-friendly. It’s impossible to build everything,” states Everett, “but from a data management perspective we have a lot of our own systems and can be self-reliant because of it.”
 
In terms of the needs of entrepreneurs in growing their businesses, Everett takes a unique perspective informed by his time in both the banking and community development worlds. “There’s been a hyper concentration on affordable housing and microlending in the CDFI space,” says Everett. “I think that’s good but from a macro-perspective, with banks making the operational decision to focus on loans above $1,000,000 and CDFIs focusing on loans less than $50,000, there’s just a huge gap. That’s the space we’re trying to fill.” According to Everett, in order for businesses to grow, create jobs, and create wealth in their communities, there needs to be more of a focus on helping these mid-sized businesses get the capital they need. “We’re helping the LMI population because, for 19% of the businesses we help, 40% of their employees would qualify as low-income. We support those jobs. We also care about minority businesses, women, and people of color, because they have jumped into the entrepreneurial space in a major way,” says Everett. In his view, “if we don’t uphold these populations and provide the financing in this space,” the alternative for these borrowers is high-cost lending with potentially terrible results.
 
Lendistry became a BBoR Signatory after engaging with RBLC members Community Investment Management and Opportunity Fund. Already a responsible lender, the BBoR was a natural fit for the organization. “CDFIs are supposed to go where banks can’t go. That’s our job,” says Everett. Lendistry does this using innovative technology, driven staff, and an eye towards the community. This is what makes them an important signatory of the BBoR.
 
We thank Lendistry for taking the time to talk with us about their lending and the importance of the Small Business Borrower’s Bill of Rights in the small business lending Industry. 
 
If you are interested in learning more about the Small Business Borrower’s Bill of Rights please email info@borrowersbillofrights.org.
 
If your organization is currently a signatory or endorser of the Small Business Borrower’s Bill of Rights and would like to be featured in our blog, please contact Gabriel at Gabriel@opportunityfund.org.

Gabriel Villarreal of Opportunity Fund (a Small Business Borrowers’ Bill of Rights founder) sat down for a conversation with Dory Rand, President of Woodstock Institute. The organization became an Endorser of the Rights in May 2018.
 
Woodstock Institute is a leading nonprofit research and policy organization working in the areas of fair lending, wealth creation, and financial systems reform. Woodstock Institute works, “to create a financial system in which lower-wealth persons and communities of color can safely borrow, save, and build wealth so that they can achieve economic security and community prosperity.” Founded in 1973 in its namesake town of Woodstock, Illinois, the organization is now housed in the metropolitan center of Chicago. Its President, Dory Rand, is a longtime advocate for marginalized communities.
 
“I was actually acquainted with Woodstock long before I was ever an employee here,” says Dory. “In 1997, I was doing poverty law, dealing with the rollout of electronically delivered public benefits, and we realized that this was actually a great opportunity to expand access to bank accounts and other financial services to low-income families.” She worked with Woodstock on various financial services initiatives before formally joining the organization as its President in 2008. Since that time, she has overseen the expansion of several initiatives related to financial services, including a deep-dive into the state of small business lending. “Policy and research have always been the central focus for Woodstock,” says Dory.
 
One of Woodstock’s signature research initiatives in the past couple of years has been publication of a series of reports called Patterns of Disparity which, in collaboration with several other community-based organizations, examines Community Reinvestment Act (CRA) reported small business loans by banks in different regions of the country. In the absence of a comprehensive data set examining all small business lending nationwide, this research gives a comprehensive snapshot of the state of small business lending by banks, particularly in low- and moderate-income (LMI) and minority census tracts. These widely cited reports found that, in different regions of the country from Los Angeles to Detroit to Buffalo, there has been a pronounced decrease in both the number and dollar amount of small business loans in LMI and minority census tracts. “What really got to us was hearing the stories of folks who had turned to non-bank online lenders with really high costs and complex terms and got trapped in debt just like consumers who get trapped by payday loans,” says Dory.
 
It is these concerns about high-cost lending that led Woodstock to engage with the Responsible Business Lending Coalition and, ultimately, sign the Small Business Borrowers Bill of Rights (the Rights). “Our friends at ACCION Chicago looped us in and that’s where we met Opportunity Fund, Small Business Majority, and some of the financial technology firms (fintechs) like Lending Club,” says Dory. “I thought it was really positive that people were trying to set a higher standard for fair small business lending.”
 
Dory also noted the ripple effect that the Rights have had on the small business lending industry as a whole: “I saw a pretty quick evolution in how other members of the fintech industry looked at their own practices…. Early conversations with some of the high-cost fintech lenders were pretty one-sided when we brought up APR disclosures and ability-to-repay standards. The Rights have forced some of these groups, even if they are not signatories, to change their practices and start providing better disclosures.”
 
This positive momentum is made possible, in part, by groups such as Woodstock Institute, whose research and policy work moves the small business lending industry in a more equitable and transparent direction.
 
We thank Woodstock Institute for taking the time to talk with us about its research and the importance of the Small Business Borrower’s Bill of Rights in the small business lending industry. 
 
If you are interested in learning more about the Small Business Borrower’s Bill of Rights please email info@borrowersbillofrights.org.
 
If your organization is currently a signatory or endorser of the Small Business Borrower’s Bill of Rights and would like to be featured in our blog, please contact Gabriel at Gabriel@opportunityfund.org.
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