The Obama administration announced Wednesday two new initiatives designed to increase loans to small businesses in black neighborhoods and underserved communities across the country.
While small business owners in African American communities are struggling to obtain loans, the U.S. Small Business Administration (SBA) said it will work closely with the nation’s more prominent lenders to make loans more accessible to black entrepreneurs.
“We want to increase opportunities that will allow underserved communities to have more access to capital,” SBA Administrator Karen Mills said in a conference call with reporters Wednesday.
During the call, Mills also named Catherine L. Hughes, chairperson and founder of Radio One, Inc., and a former SBA borrower, to chair the agency’s new Advisory Council on Underserved Communities.
“Many entrepreneurs and small business owners across the country have enormous potential to drive economic growth and create good-paying jobs in their local communities, but too often they face barriers in fulfilling that potential,” Hughes said in a statement. “SBA assistance played a critical role in my success, and I’m eager to do all I can to help make sure others have access to these same opportunities.”
Radio One, which is owned by Hughes, operates 52 radio stations in major markets across the country, making the company the largest black-owned radio chain in the nation.
The SBA’s new Advisory Council on Underserved Communities will consist of 20 members from across the country. Over the next few weeks, the SBA will accept nominations for members to serve on the CUC.
Mills said the new loan initiatives are in line with the agency’s core mission of supporting small business growth and job creation, and goals of the new Advisory Council on Underserved Communities.
The Council will provide input, advice and recommendations on how SBA through its programs can help strengthen and sustain small businesses in black neighborhoods.
Mills said government studies have shown the importance of lower-dollar loans to small business growth in underserved communities and the SBA is offering loan initiatives up to $250,000 — or more if applicants are eligible.
The agency’s most popular loan product, government-guaranteed loans, can be used for variety of general business purposes, including working capital and purchases of equipment and real estate. But the sluggish economy has taken a toll on small businesses – and lenders.
“Over the last two years, we’ve seen lending to all small businesses tighten up, and that tightening has been even greater in traditionally underserved communities, including among minorities, women and in rural areas,” Mills said in a statement.
“A region by region analysis of Small Business Administration data shows that SBA 7a and developing company loans to African-American-owned businesses declined as much as 80 percent in every region of the country from the high points in fiscal years 2007 and 2008,” the website reported.
But Black Enterprise maintains that SBA loans are a sound way to jump-start a business with low risk.
“The lenders are affiliated by the SBA in sense that the lenders – bank or otherwise – extends the capital to the business and submit it to the SBA for their approval as a guarantor,” according to Black Enterprise. “If approved, the SBA will back up to 75% of some or the entire loan. This means that if the borrower defaults on the bank or lending institution, the SBA will pay that institution 75% of the balance.”
Mills said the SBA is focused on making sure qualified black applicants have access to the loans they need to be successful.
“These new Advantage initiatives are aimed directly at getting more loans into these markets so these small business owners can get the capital they need to start or grow their business and create good paying jobs in local communities across the country,” Mills said.