Lanza Weil Testimony

Summary

Testimony of Raymond Lanza-Weil, president of Common Capital, Inc., a CDFI loan fund in Springfield, Massachusetts, submitted to the U.S. Senate Committee on Small Business & Entrepreneurship on February 26, 2025 for the hearing Hearing from Lenders: Managing Risk for the Long-Term in the 7(a) Loan Program. The testimony describes Common Capital's lending of up to $300,000 to businesses that cannot obtain full bank financing, and states that it has made over 900 loans totaling more than $35 million since 1990. It reports 41 Community Advantage loans totaling $5.3 million since 2012 with one loss, and a portfolio of $9.4 million at the end of 2024. It explains how Community Advantage guarantees offset collateral shortfalls and urges the committee to continue and expand the Community Advantage program. Oral testimony is followed by longer written testimony with a portfolio table.

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                                    Testimony of
                             Raymond Lanza-Weil, President
                                 Common Capital, Inc.

                                 Submitted to
          U.S. Senate Committee on Small Business & Entrepreneurship
                              February 26, 2025
    “Hearing from Lenders: Managing Risk for the Long-Term in the 7(a) Loan
                                  Program”

Good afternoon, Chair Ernst, Ranking Member Markey, and distinguished members of the
Committee. Thank you for the opportunity to speak with you today.

I am Raymond Lanza-Weil, president of Common Capital, a 35-year-old CDFI loan fund based
in Springfield, Massachusetts. Common Capital makes loans to small businesses that can’t get
some or all of the financing they need from conventional lenders, such as banks and credit
unions. We make loans up to $300,000 and provide no-cost business assistance, education, and
training to our borrowers; our Business Assistance program is primarily funded by annual grants
from the SBA’s Microloan program.

Common Capital serves a four-county region with 820,000 residents. Our annual operating
budget is just shy of $2 million. Even though we are a small organization serving only a fraction
of the state’s geography and population, Common Capital is the leading SBA Microlender and
SBA Community Advantage lender in Massachusetts.

Since our founding in 1990, we’ve made over 900 loans totaling more than $35 million to small
businesses in Western Massachusetts—loans that have helped create or retain 2200 jobs.

At the end of 2024, Common Capital’s loan portfolio totaled $9.4 million and 54% of our loans
receivable were SBA Microloans or Community Advantage (“CA”) loans. By itself, Community
Advantage loans make up 34% of our portfolio.

Common Capital’s lending is high impact, and that includes our CA loans. Eighty-seven percent
of our CA portfolio dollars is loaned to business owned by people with low-to-moderate income
(“LMI”) or located in LMI census tracts. Seventy-three percent is loaned to startup businesses;
47% to woman owned businesses; and 17% to Veteran-owned businesses.
Common Capital was one of the original Community Advantage lenders. Since making our first
CA loan in 2012, we’ve made 41 CA loans totaling $5.3 million, with only one loss.

Needless to say, Common Capital is a strong supporter of the SBA and the Community
Advantage program. It helps us fulfill our mission of creating economic opportunities for people
with low-to-moderate income by increasing access to capital for the small businesses they own.

For example, here’s a story about one of our CA loans.

Alan had worked in construction in rural Western Massachusetts for over 35 years when, in
2018, he had an entrepreneurial seizure and decided to open his own timber frame construction
business. After three successful years, significant supply chain issues and higher prices on
construction materials resulted in losses on a large, fixed price contract. But demand for Alan’s
craftsmanship continued to grow, so the business sought financing for new equipment and
working capital from their bank, which was unable to help them due to the company’s recent
losses. Alan turned to Common Capital. The path to “yes” was challenging because the
business’s assets available as collateral were well short of our underwriting requirements.
Common Capital was able to offset this shortfall with an 85% SBA Community Advantage
guaranty and today this rural business has retained its six employees, hired new ones, and is
thriving.

As you know, and as this story illustrates, regulated financial institutions can’t help every
business that applies for a loan- nor should they. Banks necessarily say “no” to some applicants
in order to protect their depositors and shareholders, and to contribute to the safety and
soundness of our financial system.

Yet, banks and credit unions are our primary source of referrals. We don’t compete with banks;
we support and augment their customer relationships. Referring banks keep their customers as
depositors and continue to provide other banking services to these businesses. When we provide
a loan to a bank’s customer, it’s a win-win-win.

Before I conclude, I want to tell you another story.

Celeste and Jessica had a combined 30 years of experience working as nurses in and around
Springfield when, in 2021, they recognized the growing need for home health care in their urban
communities; they responded by starting their own home health care agency. Celeste and
Jessica’s business could not bill to Medicare or other insurance companies until they provided
pro bono services to a specified number of clients. This requirement creates a daunting financial
challenge. Celeste and Jessica could not obtain financing from a bank due to being a startup and
a lack of sufficient collateral for a sizable working capital loan. Once again, Common Capital
turned to the SBA’s Community Advantage program to overcome these challenges and help two
entrepreneurs start a business that is providing essential healthcare services and creating jobs.


Senators, too many small business owners that hear “no” from a bank successfully search online
for easy money- it’s available, it’s expensive, and it’s harmful to our business community. To

Lanza-Weil Testimony                                                                     Page 2 of 5
U.S. Senate Committee on Small Business & Entrepreneurship
February 26, 2025
combat this, CDFIs and other community loan funds try to fill the gap. With our help, these small
unbankable businesses are creating jobs, generating economic activity, and paying taxes. These
small businesses continue to be bank customers and, if they do well enough, will become bank
borrowers, too.

We accomplish this work with the support of the SBA. Our continued success, and the success of
the small business community in Western Massachusetts, depends upon the availability of SBA
Microloans and the SBA CA program. I urge you to continue supporting the Community
Advantage program, and to expand it so that more mission-focused lenders like Common Capital
can increase access to capital for low-to-moderate income and low-wealth entrepreneurs.


                    [End of oral testimony. Written testimony continues below.]


Common Capital is a small CDFI. Our market area is the four counties of Western
Massachusetts, which is anchored by Springfield, Massachusetts. Our four-county region has a
population of about 820,000 people, which is about 12% of the Commonwealth’s total
population of 7 million.

Common Capital’s annual operating budget is just shy of $2 million. Our team had 5 or fewer
staff members for many years and has grown to 9 people over the last 5 years.

Since our founding in 1990, we’ve made over 900 loans totaling more than $35 million to small
businesses in Western Massachusetts. Since our inception, Common Capital’s average loan size
has been $39,000. These loans helped create or retain 2200 jobs.

About a third of that activity has occurred during the 6 years that I’ve led Common Capital,
during which time we’ve made $11.9 million in loans, which helped create or retain nearly 700
jobs. Our average loan size during this period has grown to about $48,000 and our charge offs
have been less than 5% of our portfolio. And we provided 19,000 hours of business assistance,
education, and training to small business owners over the last 6 years. This additional service
sets us apart from conventional lenders, helps as identify and address risk in our portfolio, and is
integral to our impact in the community. Importantly, the SBA is a primary funding source for
our Business Assistance Program.

As of December 31st, 2024, our loan portfolio had 127 borrowers with $9.4 million in loans
outstanding. Fifty-four percent of our portfolio (as measured by dollars) are SBA microloans or
Community Advantage loans.

Common Capital was one of the original Community Advantage lenders. Since making our first
CA loan in 2012, we’ve made 41 CA loans totaling $5.3 million. Our CA portfolio currently has
31 loans totaling $3.2 million and we’ve had only one loss.

Our CA portfolio is concentrated in Retail, Healthcare, Manufacturing, Transportation,
Construction, and Restaurants. Our borrowers are local, main street, mom and pop businesses,

Lanza-Weil Testimony                                                                       Page 3 of 5
U.S. Senate Committee on Small Business & Entrepreneurship
February 26, 2025
including an Italian bakery and coffee shop; microbreweries; hair salons; an auto repair business;
restaurants; sports facilities; physical and mental health care providers; truckers; bus
transportation for students; and retailers.

All of Common Capital’s lending is high-impact and that includes our Community Advantage
loans:

                                        As of December 31, 2024
    Total Portfolio                                     CA Portfolio
    (216 loans)         $   9,369,365                   (30 loans)          $   3,247,226
    LMI                 $   6,824,777      73%           LMI                $   2,834,448     87%
    Start up            $   5,102,840      54%           Start up           $   2,376,419     73%
    BIPOC               $   3,949,497      42%           BIPOC              $   1,929,725     59%
    Women               $   4,273,885      46%           Women              $   1,536,103     47%
    Opportunity Zone    $   2,095,527      22%           Opportunity Zone   $     936,204     29%
    Veterans            $     914,866      18%           Veterans           $     542,008     17%
.

As you know, regulated financial institutions can’t help every business that applies for a loan-
nor should they. Banks necessarily say “no” to some applicants in order to protect their
depositors, their shareholders, and to contribute to the safety and soundness of our financial
system.

And when banks say “no,” it creates a financing gap that community loan funds like Common
Capital try to fill. We don’t say “yes” to everyone, but we are able to take and manage more risk
than banks can. Another important feature of CDFI loan funds is that we can be more patient
with our borrowers than banks can be, which is a key factor in our ability to help businesses
form, grow, create jobs, and succeed.

Banks and credit unions are important partners for Common Capital: They are our primary
source of referrals. We don’t compete with banks; we support and augment their customer
relationships. Since loan funds are non-depository financial institutions, banks that refer loan
applicants to us keep their customers as depositors and continue to provide other banking
services to these businesses. If we can provide a loan to a bank’s customer, then it’s a win-win-
win.

How is our lending different from a bank? Of course, we consider the 5 Cs of credit: Character,
Capacity, Capital, Collateral, and Conditions. Our primary criterion is Capacity–namely, the
applicant’s ability to repay the loan. But in contrast with banks, we often rely on projected
revenues and profits in our decision making. Second, we focus on Character, but unlike banks,
we do not rely on credit scores. Instead, we carefully evaluate the underlying payment behavior,
while also spending a lot of time getting to know the person in front of us. We lend to people, not
paper.

Finally, Collateral is not a material consideration for us when we make a loan under $50,000;
many of our microloans are functionally unsecured. For larger loans–in our case, above $50,000

Lanza-Weil Testimony                                                                        Page 4 of 5
U.S. Senate Committee on Small Business & Entrepreneurship
February 26, 2025
and up to our $300,000 loan limit–we are more flexible than banks on Loan to Value and
Collateral Coverage calculations. We’re flexible, but there are still a lot of businesses we can’t
help because they don’t have enough collateral for even our more relaxed criteria, unless we
obtain some sort of credit enhancement. And that’s where the Community Advantage program
comes in. We primarily use CA guarantees to offset our collateral risk.


Most of these businesses would not have been able to form or grow without the help of Common
Capital or another CDFI loan fund. With our help, these small unbankable businesses are
creating jobs, generating economic activity, and paying taxes. These small businesses continue to
be bank customers and, if they do well enough, will become bank borrowers, too.

Banks and credit unions are essential to the business community, but they can’t help everyone.
Too many small business owners that hear “no” from a bank successfully search online for easy
money- it’s available, it’s expensive, and it’s harmful to our business community. To combat this,
CDFIs and other community loan funds try to fill the gap.

Common Capital has been successful in doing so and we could not have done it without the
support of the SBA. Our continued success and impact, and the success of the small business
community in Western Massachusetts, depends upon the availability of SBA Microloans and the
SBA CA program I urge you to continue supporting the Community Advantage program, and to
expand it so that more mission-focused lenders like Common Capital can increase access to
capital for low-to-moderate income and low-wealth entrepreneurs.




Lanza-Weil Testimony                                                                       Page 5 of 5
U.S. Senate Committee on Small Business & Entrepreneurship
February 26, 2025


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