Capital Access for Small & Minority Owned Businesses in Greater St. Louis

by Jason Whiteley | Oct 25, 2016

The St. Louis Regional Chamber, Regions Bank, and the Initiative for Competitive Inner Cities partnered to bring the Inner City Capital Connections (ICCC) program to St. Louis on September 29th at Washington University in St. Louis.  107 companies attended the program that provides training, financial education, and networking.  Businesses are mentored by bankers who specialize in small business lending and engage in learning modules where they are instructed by business experts and renowned academics.  The ultimate goal of the program is to provide growth businesses in urban areas with the resources and connections they need to attract capital and expand their business.  Of the 107 ICCC attendees, 68% of the businesses were minority-owned and 35% of the businesses were women owned.  Industries include accommodation & food service, business services, construction, education, health care & social assistance, manufacturing, media & publishing, technology & software development, transportation & logistics, and wholesale & retail trade.  In 2014, 90% of ICCC participants nationally were able to raise debt capital and 100% of ICCC participants were able to raise equity less than 1 year after their completion of the program. This program advances several aspects of the Chamber’s regional strategic plan including: economic development as well as inclusion & entrepreneurship.

Small business financing is particularly important as small businesses have such a large impact on employment and economic development in the U.S.  Small businesses are not only responsible for employing nearly half of all private sector workers but have also been responsible for 64% of all new jobs created since 1995. Research has found that obtaining a business loan has a strong effect on the long-term financial position of a small business and that small businesses that receive funding are much more likely to continue to operate and enjoy higher revenues in the future.  The Small Business Administration (SBA) administers loans in the region through their 7(a) loan program and their CDC/504 loan program.  The SBA 7(a) loan program helps new and existing small business with financing while the CDC/504 loan program provides long-term financing for equipment and real estate. These loans are issued by local financial institutions but are guaranteed by the SBA.  The average small business loan in the St. Louis MSA for all reporting financial institutions in 2014 was $45,411 which exceeded the national average for small business loans of $38,265. SBA 7(a) loans are typically much larger than the standard small business loan, with the average 2015 7(a) loan in the St. Louis region equal to $342,038.

ST. LOUIS MSA SMALL BUSINESS ADMINISTRATION LOANS - FY 2015.

   Loans Approved   Total Amount of Loans    Average Loan 
 SBA 7(a)  553  $189,147,100  $342,038
 CDC/504  47  $36,033,000  $766,660
 Total  600  $225,180,100  $375,300


Capital financing can be a particularly difficult problem for women and minority owned businesses who are typically far less likely to apply for loans than their male and nonminority counterparts for fear of denial.  New minority businesses are also significantly more likely to be denied for loans, even after controlling for factors such as organizational structure, credit score, and type of business.  The large growth in payroll, revenues, and employees that has been driven by a surge in the number of minority and women owned firms in the St. Louis region over the last several years highlights the importance of these businesses as growth drivers for wages, employment, and economic mobility.  However, the latest available data suggests that the revenues of these businesses continue to lag behind other firms.  St. Louis is prioritizing small & medium sized businesses and women & minority owned businesses by promoting programs, such as the SBA Loan Programs and Inner City Capital Connections (ICCC), that will help these companies attract capital and scale their operations.

Sources: Inner City Capital Connections, U.S. Small Business Administration, Federal Financial Institutions Examination Council, U.S. Census Bureau, Inc.com, California Association for Micro Enterprise Opportunity, OECD, International Journal of Business and Management.