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Power of the Black dollar: Small businesses have more loan options

Some lenders are fine-tuning their focus on customers, and working to promote products to fund Black-owned small businesses.
Power of the Black dollar: Small businesses have more loan options
Posted at 7:24 PM, Feb 21, 2024

Black-owned businesses in the United States continue to grow in quantity and in their revenue, data shows. This data comes amid an environment where there is a stark difference between the racial makeup of business owners in the U.S. and the proportion of revenues those businesses draw in. 

Census Bureau data shows that Black-owned businesses increased by around 13% between 2017 to 2020. Between 2017 and 2021, their revenues jumped by 43%. 

Ted James, a former regional administrator with the U.S. Small Business Administration, said the U.S. is seeing what could be called a small-business boom. 

SBA administrator Isabel Casillas Guzman said in early January, "In the last year alone, Americans across the country and in a wide range of industries filed a record 5 1/2 million new business applications, bringing the total number under this administration to a record-breaking 16 million."

The SBA said that in the first three years of the Biden administration, the monthly average of new business applications was at 440,000. 

James says lending institutions that work with the SBA "understand that they too are taking a chance on the smallest of small businesses — particularly those in underrepresented communities. Mostly those are businesses of color."

And James said people of color behind these small businesses are leading the applications for further funding of their businesses. 

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James said the SBA offers fixed loans and funding through credit unions — but the big money is through offerings from community development financial institutions (CDFIs), financial technology companies, and other nonprofit lenders that are two or even three times more likely to lend to small Black-owned businesses. 

Rules regarding what makes a business creditworthy have changed, and lenders — especially through the SBA — have more options to lend to Black-owned small businesses. 

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