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Community-Based Factoring Companies and Small Business Lending

  • Dimitri B. Papadimitriou

    (The Jerome Levy Economics Institute)

  • Ronnie J. Phillips

    (The Jerome Levy Economics Institute)

  • L. Randall Wray

    (The Jerome Levy Economics Institute)

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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File URL: http://128.118.178.162/eps/mac/papers/9906/9906013.pdf
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Paper provided by EconWPA in its series Macroeconomics with number 9906013.

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Length: 35 pages
Date of creation: 24 Jun 1999
Date of revision:
Handle: RePEc:wpa:wuwpma:9906013
Note: Type of Document - Acrobat PDF; prepared on IBM PC; to print on PostScript; pages: 35; figures: included
Contact details of provider: Web page: http://128.118.178.162

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  1. Steven M. Fazzari, . "The Investment-Finance Link, Investment and U.S. Fiscal Policy in the 1990s," Economics Public Policy Brief Archive 9, Levy Economics Institute.
  2. Eli M. Remolona & Kurt Wulfekuhler, 1993. "Finance companies, bank competition and niche markets," Research Paper 9316, Federal Reserve Bank of New York.
  3. 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.
  4. 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.
  5. Katherine A. Samolyk & Rebecca Wetmore Humes, 1993. "Does small business need a financial fix?," Economic Commentary, Federal Reserve Bank of Cleveland, issue May.
  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. Donald G. Simonson, 1994. "Business Strategies: Bank Commercial Lending vs. Finance Company Lending," Economics Working Paper Archive wp_112, Levy Economics Institute.
  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. Jerry L. Jordan, 1993. "Community lending and economic development," Economic Commentary, Federal Reserve Bank of Cleveland, issue Nov.
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