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Community-based Factoring Companies and Small Business Lending

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  • Dimitri B. Papadimitriou
  • Ronnie J. Phillips
  • L. Randall Wray

Abstract

At a time when small businesses are suffering from a credit crunch, "niche" financial institutions increasingly are filling the void left by more traditional sources of financing, such as commercial banks. In this working paper, authors Dimitri B. Papadimitriou, Ronnie J. Phillips, and L. Randall Wray argue that among the most important of these niche players are community-based factor companies, which are rapidly expanding beyond their traditional customer base in the apparel and textile industry to finance a broad range of firms in everything from electronics to health care. Moreover, because factors are becoming an increasingly important source of financing for small and start-up businesses, the authors propose that factors be encouraged to play a broader role in financing firms in distressed communities. In some cases community-based factors should be eligible for funding and assistance under the administration's new community development financial institutions legislation. In addition, investment by banks in these factors should count toward compliance with the proposed new regulations for the Community Reinvestment Act.

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Bibliographic Info

Paper provided by Levy Economics Institute in its series Economics Working Paper Archive with number wp_108.

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Date of creation: Apr 1994
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Handle: RePEc:lev:wrkpap:wp_108

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  1. David C. Wheelock, 1993. "Is the banking industry in decline? Recent trends and future prospects from a historical perspective," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 3-22.
  2. Hyman P. Minsky & Dimitri B. Papadimitriou & Ronnie J. Phillips & L. Randall Wray, . "Community Development Banking, A Proposal to Establish a Nationwide System of Community Development Banks," Economics Public Policy Brief Archive 3, Levy Economics Institute.
  3. Jerry L. Jordan, 1993. "Community lending and economic development," Economic Commentary, Federal Reserve Bank of Cleveland, issue Nov.
  4. Eli M. Remolona & Kurt C. Wulfekuhler, 1992. "Finance companies, bank competition, and niche markets," Quarterly Review, Federal Reserve Bank of New York, issue Sum, pages 25-38.
  5. Donald G. Simonson, 1994. "Business Strategies: Bank Commercial Lending vs. Finance Company Lending," Economics Working Paper Archive wp_112, Levy Economics Institute.
  6. Steven J. Davis & John Haltiwanger & Scott Schuh, 1993. "Small Business and Job Creation: Dissecting the Myth and Reassessing theFacts," NBER Working Papers 4492, National Bureau of Economic Research, Inc.
  7. George E. French, 1994. "Banking in Transition," Economics Working Paper Archive wp_114, Levy Economics Institute.
  8. Katherine A. Samolyk & Rebecca Wetmore Humes, 1993. "Does small business need a financial fix?," Economic Commentary, Federal Reserve Bank of Cleveland, issue May.
  9. Dimitri B. Papadimitriou & Ronnie J. Phillips & L. Randall Wray, . "A Path to Community Development, The Community Reinvestment Act, Lending Discrimination, and the Role of Community Development Banks," Economics Public Policy Brief Archive 6, Levy Economics Institute.
  10. Mian, Shehzad L & Smith, Clifford W, Jr, 1992. " Accounts Receivable Management Policy: Theory and Evidence," Journal of Finance, American Finance Association, vol. 47(1), pages 169-200, March.
  11. Steven Fazzari, 1993. "The Investment-Finance Link: Investment and U.S. Fiscal Policy in the 1990s," Economics Working Paper Archive wp_98, Levy Economics Institute.
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