Report Card on SBA Loans to Minorities

The Greenlining Institute produces an annual report card that grades the largest US banks on their SBA lending activities to minorities – specifically African Americans, Asian Americans and Latinos.

Only one bank got an “A”. There was a handful or so of “B” grades. As for the rest, they got a spanking on their hands with a ruler.

You can read the full report, but here’s a couple of highlights:

• No bank met Greenlining’s challenge to originate 60% of all its SBA loans in 2006 to minority entrepreneurs, split equally amongst African Americans, Asian Americans and Latinos. Citigroup came close at 56%. Bank of America scored #1 for largest number with 5,468 SBA loans to minorities.
• African American small businesses are the most underserved by financial institutions in terms of both the number and percentage of SBA loans originated to this group compared to other groups in the study. Bank of America was at the top of the list in both the number of SBA loans and the percentage of its SBA loans.
• Citigroup and PNC did the best in percentage of SBA loans to Asian Americans both surpassing Greenlining’s minimum lending goal of 20%. Bank of America was tops in the number of SBA loans to Asian Americans.
• Close, but no cigar for Citigroup who came close to meeting the 20% goal for Latinos with Bank of America not far behind. Bank of America had more than twice the number of SBA loans to Latinos than second place J.P. Morgan Chase.
• Three banks received overall “F’ grades – Key Bank, Capital One and Fifth Third. Ouch!

At the end of the day, the Greenlining Institute says the number of minority owned businesses in the United States is growing at two or three times the national average for all U.S. businesses, but the proportion of SBA loans going to minority entrepreneurs has remained constant at one-third of all SBA loans.

According to the Greenlining Institute, if banks would originate 60% of their annual SBA loans to minorities, this would double the number of SBA loans to minority owned businesses.

Here are two questions I have on this report card.

• Does it take into consideration the demographic and geographic footprint of each respective financial institution?
• What were the actual approval rates for SBA business loans to minorities of each respective financial institution?

Check out my earlier blog postings for other resources on loan program directed minorities!

• We Don’t Do Stupid
• Guia Para Obtener Prestamos - ABCs of Borrowing
• There's a New Bank in Town
• Unique Business Loans for Minorities
• Capital Access for the Hispanic Community
• More on Minority Loan Programs

Need help finding the right lender or telling your story the right way? Read "Matchmaking for Business Loans" and give me a call!

Tags : SBA loans , minorities , African American , Asian , Latino , Greenlining Institute

We Don't Do Stupid

I recently served on an access to capital panel with Michael Banner, president and CEO of the Los Angeles Local Development Corporation (LDC). A community development financial institution (CDFI), the mission of the LDC is to provide business loans to people and communities under-served by traditional financial institutions.

Targeting distressed communities and under-served ethnic groups (such as Latinos, African Americans and Asians) in the greater Los Angeles area, Banner and his team use a common sense approach to structuring creative loans to solve complicated problems a typical bank might shun. While the LDC may go where others fear to tread, Banner is an experienced banker and proudly claims that “we are prepared to take more risk, but we don’t do stupid”.

Since assuming the leadership role in 1995, Banner has grown the LDC’s assets to over $14 million from $4 million by focusing on business loans which are catalytic in nature. The impact to the community is even greater than the numbers would suggest as LDC often convinces other, more hesitant lenders and socially responsible investors to participate once it takes the lead. The loan amounts range from $25 thousand to over $5 million. The interest rates charged on all loans reflect the risk entailed and are often competitive with interest rates charged on SBA loans – don’t expect to see interest rates lower than what a bank might charge but Banner does say, “we don’t pretend, we just lend”. Success stories include loans to Homeboy Industries’ Silkscreening Division, the Big Saver Foods Shopping Center and Mao Foods.

With a double bottom line focus, LDC always asks how much of a difference the loan makes to the community. As real estate and fixed assets are often a visible symbol of that impact, real estate loans and term loans comprise almost 75 percent of LDC’s total loan portfolio. The balance of the loan portfolio consist of a wide variety of credits ranging from revolving lines of credits, equipment loans, and asset based working capital facilities to middle market borrowers, but LDC often leads participations or co-lends with other lenders to meet the larger borrowing needs of its clients.

LDC can help a business with its business loan requirements in a number of ways and thus serve many more borrowers than one would think given its small number of employees. In addition to being a direct lender, LDC can bring in other lenders as partners, syndicate entire loans and also serve as an advisor in structuring tax exempt loans for the acquisition of business real estate. Well connected within the financial community, LDC can direct borrowers to the right place even when they are not the solution themselves.

Don’t live in the Los Angeles area? More than 1,000 CDFIs operate in low-wealth communities in all 50 states and the District of Columbia. CDFIs can be banks, credit unions, loan funds, venture capital funds, community development corporations or micro enterprise loan funds. All are united in their primary mission of community development. Check out the CDFI website for a similar organization in your neighborhood!

Need help finding the right lender or telling your story the right way? Read "Matchmaking for Business Loans" and give me a call!

Tags : Los Angeles LDC , Michael Banner , CDFI , business loans , SBA

SCORE Offers More

This just in on how to get more from SCORE...

SCORE “Counselors to America’s Small Business” recently announced three new content areas of the SCORE Web site. These added sections offer valuable information, tips and interactive workshops to help small business owners achieve success.

Of the three, you might want to take a look at Learn Online which features 26 new, free workshops on starting, managing and marketing a business. Ten of these online courses address managing the finances of a small business. There are plans to add more workshops in the coming months, including some designed specifically for women and minority entrepreneurs.

Need help finding the right lender or telling your story the right way? Read "Matchmaking for Business Loans" and give me a call!

Related Tags: SCORE, SBA, small business, business loans, business advice

Access to Capital for African American Businesses

There was an interesting article in today's Los Angeles Times about access to capital for the African-American small business community.

The article points out that African American-owned businesses represent the fastest-growing segment of minority-owned businesses in the U.S., according to the latest census data. African American-owned firms grew 45% from 1999 to 2002, about six times the national average.

So where's the money to help these minority-owned businesses grow?

The article points to two African American owned banks, OneUnited Bank and Broadway Federal Bank, in the Los Angeles area - both have websites which indicate a willingness to lend to small businesses with real estate collateral.

What if your small business doesn't have real estate to offer as collateral?

The Los Angeles Times article suggests one might check out the Pacific Coast Regional Small Business Development Corporation (PCR). PCR is a private, non-profit corporation founded in 1977 to provide financial, educational and consulting services to small business owners in Southern California. PCR offers a number of small business financing solutions and administers the state's flagship loan guarantee program. All asset classes (accounts receivable, inventory, equipment and real estate) are taken into consideration as collateral for these loan programs.

Looking for a list of the top African American owned banks in the United States? Check out Black Enterprise's Top Bank List.

Still can't find a loan program directed at African Americans or other minorities? Check out my earlier blog postings for other resources!

• Guia Para Obtener Prestamos - ABCs of Borrowing


• There's a New Bank in Town


• Unique Business Loans for Minorities


• Capital Access for the Hispanic Community


• More on Minority Loan Programs

And if you still can't find capital to fuel your small business growth, there's always purchase order financing, factoring, equipment leasing and other asset based financing options to consider.

Need help finding the right lender or telling your story the right way? Read "Matchmaking for Business Loans" and give me a call!

Related Tags: Los Angeles Times, access to capital, African-American, minority business loan, business loan, factoring, purchase order financing, leasing

More on Minority Loan Programs

I've written a couple of postings on loans for minorities and capital for the Hispanic community, so I thought I would point you toward this Forbes Magazine article, Small Business Loans for Minority Entrepreneurs. Perhaps it will point you toward some resources of which you weren't aware!

Need help finding the right lender or telling your story the right way? Read "Matchmaking for Business Loans" and give me a call!

Related Tags: entrepreneur, minorities, business loans, Forbes

Capital Access for the Hispanic Community

In this month's edition of Hispanic Business Magazine, Tom Castro states that "the only thing lacking in the Latino business community is access to capital".

Castro's latest venture, Border Media Partners, is the largest privately owned Hispanic-focused radio company in the country and the best capitalized Hispanic start-up company in history. Border Media raised more than $275 million in its first 30 months.

Castro mentions the New America Alliance which was created in 1999 to focus on increasing access to markets and capital for Latino businesses. One of the big events organized by the New America Alliance is an annual fall Wall Street Summit which brings together finance leaders from Wall Street to Main Street to find ways to increase the human and financial capital available to Hispanic business.

I think the message is getting through. In just the last few weeks, I've written about a private equity source focused on the Hispanic market place, a loan program focused on minorities including the Hispanic marketplace, and the growth of new banks focused on ethnic groups including Latinos. In five years or less, access to capital for Hispanic businesses may be an issue of far less significance.

If your business needs help finding the right lender or telling your story the right way, read "Matchmaking for Business Loans" and give me a call!


Related Tags: Hispanic, access to capital, Tom Castro, Border Media Partners, business loans, capital, New America Alliance, private equity

Unique Business Loans for Minorities

SBA-like business loans to minority businesses when the bank cannot.

That sums up the Certified Minority Lenders program created by the National Minority Supplier Development Council and the Business Consortium Fund (BCF).

BCF is funded primarily through investments and contributions made by NMSDC corporate members and other organizations including companies who wish to support minority businesses in the United States including Walmart, General Electric, Sears, Boeing and Coca Cola. The targets for these loans are businesses controlled by U.S. citizens who are Asian, Black, Hispanic or Native American who are conducting business with a member of the National Minority Supplier Development Council which is practically any household name in corporate America.

Minority businesses that qualify may have weak cash flow, negative equity, a history of losses and little to no secondary source of repayment. Even with these challenges, a prospective borrower must still have solid management and sales experience in their field. The specific financial requirements will vary from account to account based upon the underwriting criterion of the lender – you had better have a good story and a complete application.

If your business qualifies, you can apply for business loan programs ranging in amount from $100 thousand to $1 million at rates that currently don’t exceed 12%. The loan can be structured as a short term or long term borrowing and proceeds can be used for working capital, contract financing, equipment purchases and other business purposes.

Generally, the borrower must pledge sufficient assets, to the extent they are reasonably available, to secure the business loan. Personal guaranties are required from all principal owners of the business. Liens on personal assets of the principals also may be required.

Sound interesting? If I can help you with an introduction to a lender who can lend nationwide, please give me a call!


Related Tags: minority, Certified Minority Lenders, factoring, business loans, working capital, cash flow, Business Consortium Fund, National Minority Supplier Development Council, SBA

Guia Para Obtener Prestamos - ABCs of Borrowing

If you are a Hispanic business owner or target that marketplace, you need to know about the launching of Hispanic SMB Online, the first online community dedicated exclusively to the 1.6 million plus Hispanic owned small businesses in the United States. The new portal provides free resources, content, news and community features designed to help the growing number of Latino small and medium sized enterprises. The website offers a section on cash flow, bank loans and other financing issues as well as an online forum to promote discussions of these topics.

Please feel free to contact me with questions or ideas for future articles!

Related Tags: SBA, Hispanic business owner, Hispanic SMB, factoring, accounts receivable, p.o. financing, purchase order financing, bank loans, equipment leasing, working capital, cash flow