Business Loans For Minority Owned Businesses – A sign in the window of a nail salon announces that business is closed while a shelter is on lockdown during the COVID-19 coronavirus outbreak on May 5, 2020 in Arlington, Virginia.
Rahma Wright has been in business for 15 years, but the veteran businesswoman never predicted the impact of the coming pandemic.
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Wright told ABC News: “It’s been a rollercoaster ride. The owner of Shea Yellen, a social impact business that sells shea butter products made by women in rural West Africa, Wright told ABC News. One of the lowest can’t get a payday protection loan, said the government’s coronavirus emergency response.
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Wright applied in early April, but by the end of the month, she said she hadn’t heard back.
“I’m very disappointed. I don’t think I’ll be able to get any support because I haven’t heard anything.” Wright laid off five employees and began considering closing its Washington, D.C. store.
Rahma’s story is similar to the frustrations of some small businesses, especially those with low incomes in America.
When the payment protection loan application process begins in April, according to Bank of America officials, large banks like Bank of America offer loans to customers who already have a relationship.
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The proposal essentially shuts down America’s small businesses, which are unable to receive aid before it expires.
According to the SBA, 89% of black-owned businesses in the United States have no paid employees other than the owner, and small businesses are less likely to apply for loan assistance. Owners who don’t normally apply for loans, or who have been systematically discriminated against for loans in the past, bear the brunt of the dizzying application process in response to the coronavirus. do
The Small Business Administration’s inspector general, Hannibal “Mike” Ware, acknowledged in the monitoring report that the program “did not prioritize the concerns of people under two, women and economically vulnerable businesses.”
“Because the SBA does not mandate lenders to prioritize borrowers in underserved, rural markets, these borrowers, including rural, minority and women-owned businesses, may not receive the loans they deserve. will find,” Ware wrote in the report. The report also criticized the SBA for not requiring applicants to provide demographic information, which could make it easier to track and avoid discrimination based on race, gender or region.
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Since most of the businessmen and minorities are not involved in this business, the legislators and the wealthy are now standing up, trying to right the wrongs that have been done, even as the businessmen are taking matters into their own hands. They are trading with banks. And even take legal action.
In late April, Congress approved a second round of $310 billion in funding to replenish the program, and this time lawmakers took steps to allocate more money to minority, women-owned and rural businesses. have been added.
About $30 billion of that money is earmarked for community financial development agencies, which aim to help small and moderate-income businesses. An additional $30 billion is earmarked for small banks with less than $10 billion in assets, which serve small businesses.
The SBA does not release information on how many and what types of businesses have received exemptions so far. However, the agency has provided information showing that small businesses have been able to get loans in the second round of the program.
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This report is part of “Illness – A Divided Nation,” ABC News’ special coverage of racial and social divisions amid the COVID-19 pandemic. Tune into “The Nightline” for three days of episodes starting tonight at 12pm ET on ABC.
The average loan size decreased from about $240,000 to more than $70,000, indicating that businesses with more employees are now getting loans. Now more than 27 lakh loans have been sanctioned since the second round whereas in the first round there were only 10 lakh loans. More than $100 billion remains in the second round of funding.
For Wright, the second round of support was a good ascent. Friday ended up getting a payday protection loan through a small bank. He estimated that the loan would buy his business for three or four months.
“A lot of black, black-owned businesses have a hard time getting financing through the big banks, so we have to look to other sources to access that capital, credit unions, and (community development financial institutions).” “One has to look at the banks,” Wright said.
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Although the second round of funding is working for Wright, some lawmakers say it’s not enough. Sen. Cory Booker, D-N.J., sent a letter Thursday to about two dozen major banks with presence in New Jersey, including Bank of America and Capital One, requesting demographic information about paycheck protection borrowers. has been done
Senator Cory Booker questions Justin Walker during a Senate Judiciary Committee hearing on Walker’s nomination to be a U.S. District Judge for the District of Columbia on Capitol Hill, May 6, 2020, in Washington.
“We know that minority entrepreneurs face challenges accessing capital, paying high interest and fees, and potentially not getting approved for loans,” Booker said. The most important thing,” Booker said.
In the House, Rep. Dwight Evans, D.-Pa. introduced a bill that would allocate $50 billion to the Community Financial Development Agency, which specializes in providing loans to low-income businesses.
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Evans said the work done in the second round of payment protection program funding is working. In one CDFI area in Philadelphia, 44 businesses were approved for program loans, saving 456 jobs.
“There’s a way we’re trying to make sure minority businesses are fully included, because they’re the backbone of the economy,” Evans told ABC News in an interview.
Stacey Hawkins Armstrong, owner of a law firm near Chicago, didn’t wait for Congress to address the issue. He filed a federal lawsuit against JPMorgan Chase for allegedly foreclosing on paycheck protection loans.
Hawkins-Armstrong employs herself and four others at Sha-Poppin, which has offered consumers more than 50 flavors of popcorn for 20 years. She said she is working hard to file an application for the payment protection program on April 3, the day she first received the application. But he got error message after error message.
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Unable to get a loan through Chase and desperate to keep his employees as credit, Hawkins-Armstrong said he eventually took out a small loan from Chase through a small bank.
“Because Chase prioritizes the customers that plaintiff wants — and many other businesses like it — plaintiff was barred from applying for a PPP loan through Chase, at one point expressly seeking a loan elsewhere. Encouraged.”, and finally he got the small one. more debt than if Chase had allowed him to work on April 3, 2020,” the lawsuit said.
When contacted, Chase spokeswoman Ann Pace said the bank has helped at least 239,000 businesses get paycheck protection loans.
“We’re not done yet. We’ll continue to implement and roll out applications to help as many small businesses as possible,” Pace said.
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In Maryland, an Annapolis law firm filed a lawsuit against the SBA, claiming the government is discriminating against minority- and women-owned businesses, requiring the bank to prioritize existing business relationships with customers. By allowing, how to cover sole proprietors. Census data shows that ownership is limited to women and minorities.
“SBA and Treasury know they’re hurting minority and women-owned businesses with their statistics. And they know the program is underfunded. You can do the math behind the scenes and $350 billion isn’t there. Is.” Not nearly enough. to meet the needs of the country,” Matt Crowther, a partner at the Frost Law Firm, told ABC News in an interview.
As the legal battle continues, several philanthropists have stepped in to fill the void, including a basketball legend.
Magic Johnson’s EquiTrust Life Insurance Company will partner with MBE Capital Partners, a non-bank private equity lender focused on underserved small businesses, to offer PPP loans. According to the Wall Street Journal, Johnson will invest $100 million to help MBE Capital provide more than 5,000 SBA-approved PPP loans.
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Aaron” Magic Johnson, chairman and CEO of Magic Johnson Enterprises, speaks on stage at the Marriott Marquis Times Square on October 29, 2019 in New York City.
“We’ve allocated $100 million to the big companies that are not part of the credit system, the incentive system that’s coming up, they can’t get credit, so we have to make sure that they continue to do business and do their business. Retain employees. . . that’s very important,” Johnson told ABC’s Robin Roberts during an appearance on “Good Morning America” on Tuesday. “This market,
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