Ripple Effect – The Macroeconomic Impact of Small Business Lending
As an entrepreneur borrows capital to invest in their business, the economic impact of that loan can span over the course of several years.
Lending to small businesses can have an “evergreen” effect, as sustainable businesses provide services to their customers, wages to their employees, and returns to their owners on an ongoing basis.
Historically, Accion Opportunity Fund borrowers have a business survival rate of 96%. In addition to their demonstrated high rate of loan repayment, this means that the impact of their loans flows throughout the economy over time. TXP’s economic model found that:
Between 2016 and 2023, AOF’s small business loans (16,533 in total) have generated a measurable “Ripple Effect,” or macroeconomic impact, across its largest lending states to date: California, Florida, Georgia, New York, and Texas.
On average, AOF’s loans generate $2.05 in additional annual economic activity across these five states—meaning that for every dollar we invest in a small business, more than $2 is spurred annually in the form of new taxes, new spending, and new wages in these states.
- California: Almost $2 for every dollar AOF invests ($1.96 for every $1), or approximately $1.1 billion is generated in annual economic activity.
- Florida: $2.01 for every dollar AOF invests, or $45.8 million is generated in annual economic activity.
- Georgia: $2.17 for every dollar AOF invests, or $21.5 million is generated in annual economic activity.
- New York: Almost $2 for every dollar AOF invests ($1.77 for every $1), or $44.9 million is generated in annual economic activity.
- Texas: $2.36 for every dollar AOF invests, or $39.4 million is generated in annual economic activity.