California’s city and regional public banks have the potential to play a vital role in supporting small and medium-sized businesses, particularly those in historically underinvested neighborhoods. These banks can serve as originators of loans, or work in partnership with community banks and credit unions to provide small business lending and funding for targeted community economic development initiatives.
Small businesses are the driving force behind economic growth and job creation in California, but they often struggle to secure credit, particularly during times of crisis such as the COVID-19 pandemic. The federal response to the pandemic disproportionately favored private equity and large firms with established banking relationships, leaving many small businesses out in the cold. Black-owned small businesses were particularly hard hit, with many forced to close their doors due to restrictive credit standards and the high costs of obtaining credit from traditional sources.
By prioritizing loans in low-income and economically deprived neighborhoods, the Los Angeles public bank can help to build wealth locally and support small-scale initiatives, non-exploitative micro-enterprises, and worker-owned cooperatives. This approach has been demonstrated to be successful in other states, such as North Dakota, where the Bank of North Dakota helped small businesses to secure more Paycheck Protection Plan (PPP) funds than any other state, and quickly launched an emergency COVID relief loan program to support small businesses. By following this model, the Los Angeles public bank can help to support the recovery of small businesses and build a more resilient and equitable economy.
North Dakota’s public bank shows us how this kind of investment model can succeed. At the outset of the pandemic, the Bank of North Dakota helped small businesses to secure more Paycheck Protection Plan(PPP) funds than any other state by workforce numbers and quickly launched an emergency COVID relief loan program for small businesses to layer on top of the PPP.
THE LOS ANGELES PUBLIC BANK WILL SUPPORT ENTREPRENEURS OF COLOR
To support vulnerable communities and promote economic equity, the Los Angeles public bank can focus a portion of its lending on micro-businesses in underserved communities. These businesses, which typically have 50 or fewer employees, are often owned by women, indigenous people, or people of color who have historically faced barriers to accessing credit. By providing targeted, below-market lending to these businesses, public banks can help to level the playing field and provide much-needed financial support to communities that have historically been disadvantaged. This not only has the potential to benefit these businesses, but it can also help to promote economic development and resilience in Los Angeles’ underserved communities.
THE LOS ANGELES PUBLIC BANK WILL KEEP MONEY LOCAL
A public bank can play a crucial role in supporting the retail, service, and restaurant industries, helping local economies to bounce back after economic challenges. By providing financial support to these sectors, the LA public bank can stimulate economic growth by creating local jobs and increasing local business tax revenue. This can be achieved through targeted investments that help to create a supportive environment for businesses to launch and thrive. Overall, the presence of public banks can be a powerful force in driving economic recovery and fostering long-term stability at the local level.