From Black Voices — With black unemployment holding at double digits, the catastrophic cut off of capital to black-owned businesses is just one more disturbing trend in what is shaping up to be the Great Black Depression.
A recent study found that in some parts of the country banks decreased lending to black-owned businesses by over 80 percent. And that’s not just loans to get businesses off the ground, but also the financing needed by black businesses to continue operating and make payroll.
In light of criticisms that previous attempts at spurring small business lending actuallytied small businesses and lenders in knots of red tape while increasing costs, the Small Business Administration recently introduced two new loan initiatives: Small Loan Advantage and Community Advantage. Although these programs will not be available until March 2011, the SBA promises that they will target lending in under-served communities by promoting small dollar loans, providing higher loan guarantees to banks and streamlining the approval process.
I spoke with Marie Johns, Deputy Administrator of the U.S. Small Business Administration to find out if these two new programs would benefit the African American community. Here is her perspective.
Gina: Conventional wisdom is that lenders aren’t lending — so how do we know that lenders are going to be more inclined to lend under this program than they were under previous programs?
Deputy Administrator Marie Johns: Through the Recovery Act and the Small Business Jobs Act we were able to increase our lending even when traditional small business lending was pretty stagnant, but we know that with these new programs, we’re going to have even more opportunities to help small businesses. They reduce paperwork for the lenders. They offer the highest guarantee that we offer — 85% on loans under $150,000 and 75% on loans higher than that. The initiatives are pegged at the smaller dollar loans, $250,000 or less, which is a part of the small business lending market that has generally been tough to address.