Access to Finance in MT Part 1: Survey of Funders
Small businesses are critical to Montana's economy, driving job creation and local development. This report analyzes data from lenders, investors, and other funding institutions to understand the financing landscape for small businesses in Montana. It highlights disparities, key challenges, and opportunities for improving access to finance.
Key Takeaway
Access to Finance by Business Types:
- 86% of respondents provide funding to startups, but smaller community-based lenders report being starved for capital to meet increasing demand.
- Banks and credit unions, while liquid, prioritize business with strong collateral and equity investment.
Demographics and Equity Gaps:
- 36% of loans or investments were made to women-owned businesses, closely reflecting Montana's 34% business ownership by women.
- Native American businesses received 18% of loans but still face barriers like trust land restrictions limiting collateral options.
Land Distribution and Types:
- Banks made 21 times more loan originations than public programs and 33 times more than CDFIs, with a median loan size of $160,000.
- Asset-based and working capital loans are the most common types of financing offered.
Challenges for Funders:
- Community-based lenders struggle with limited liquidity for onlending and high operational costs for small loans.
- Complexity in state and federal programs deter some funders from participation, despite available resources.
Program Participation and Support Services:
- 42% of funders directly offer small business development services, with an additional 49% referring clients to partners for support.
- All surveyed institutions participate in at least one state or federal loan or grant program.
Recommendations:
Expand Training and Collaboration:
- Increase training for lenders on co-funding opportunities and state or federal financing programs.
- Promote partnerships between public and private sectors to leverage expertise and expand reach.
Address Liquidity Gaps:
- Scale up successful state and federal programs to ensure adequate funding for community lenders like CDFIs.
- Develop shared service models to reduce operational costs for small loans.
Target Underserved Markets:
- Use policy incentives like smart subsidies or tax credits to reach rural, tribal, and minority-owned businesses.
- Support initiatives like the Community Reinvestment Act to attract private investments in distressed areas.
This report underscores the importance of diversifying and strengthening the funding ecosystem to better serve Montana's small businesses and drive inclusive economic growth.
Executive Summary:
The project team of Accelerate Montana, Catalyze Global Impact LLC, and the REAL Co-Lab extend their gratitude to lenders and investors for their contributions to this study. Their input was crucial for understanding Montana's small business financing ecosystem.
- Small Businesses need reliable financing to sustain operations and foster growth.
- Montana's funding landscape includes banks, credit unions, CDFIs, and various state and federal programs.
- While larger institutions are liquid, community lenders struggle with capital shortages to meet high demand.
The next steps involve:
- Expanding resources for rural, Native, and women-owned businesses.
- Boosting technical assistance for entrepreneurs statewide.
- Developing a skilled workforce to support business growth.
These efforts aim to create sustainable financing solutions and inclusive economic prosperity for all Montanans.
Read the full report: Access to Finance in Montana Part 1 Survey of Funders