From the desk of the executive director: building assets through business lending

Small Business

A mechanic and used car dealer just bought their business building thanks to a loan from the Center for Rural Affairs.

This business owner, a new immigrant, has worked for years out of the building he purchased, providing an essential service to his adopted community and earning an income for his family.

Owning the building will make his business more financially secure. As he pays off his loan, he’ll gain equity in the building instead of paying rent to a landlord. He’s also building security for retirement when the building will provide residual business income, lease income, or cash through sale.

Access to loan capital is an essential tool that enables entrepreneurs to grow their businesses and buy assets to contribute to their long-term economic security. There is nothing I enjoy more than approving a loan that transforms a small business from a tenant to an owner. We see it happen often.

Most readers will understand how this works from your own experiences. If you have ever borrowed money to buy a house, farmland, or business building, you have participated in the financial system to build an asset that will provide you with long-term economic security.

But, what if you were unable to get a loan?

That is what happens to many of the participants in the Center’s programs. They find themselves unable to access traditional bank loans due to a variety of reasons: a lack of credit history, damaged credit history, insufficient collateral, language barriers, and other systemic barriers.

Hispanic families and Black families living in the U.S. have significant and persistent wealth gaps compared to white families. This gap holds true regardless of education, generation status, or family structure. The gap between Hispanic and white families was 21 cents per dollar of white wealth.

Real estate ownership is an important and the most common way of building generational wealth for all families. It’s also one of the reasons the Center recently began offering home mortgage and home repair loans alongside business loans.

We strive to lend responsibly. Not everyone is ready to take on a loan. We verify our clients’ loan readiness to ensure we’re not hurting them by helping them.

Thanks to support from our donors, Center staff members can spend time working directly with clients, preparing them to borrow. By the time we approve a new loan, we often have dozens of hours of one-on-one business and financial coaching into the application.

Helping rural people overcome barriers to credit, participate in the financial system, and improve their long-term economic security improves the quality of life for all people who call our communities home. That’s why we do it.