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Biden’s SBA doubles lending to minority entrepreneurs in 2023

SBA loans to Black-owned businesses surpass $1 billion for third year in a row

The U.S. Small Business Administration (SBA) announced that it has backed more than 4,700 loans to Black-owned small businesses in fiscal year 2023, totaling $1.45 billion. This is more than double the number and amount of loans in fiscal year 2020, when the SBA approved 1,718 loans worth $592 million to Black-owned businesses. The share of SBA loans to Black-owned businesses also increased from 3.5% in 2020 to 7.6% in 2023.

SBA Administrator Isabel Guzman said that the Biden-Harris administration is committed to addressing the historic underinvestment and capital gaps that have limited the growth and success of Black entrepreneurs and other underserved small business owners. She said that the SBA’s lending programs offer government-backed loans with favorable terms to fill market gaps and get needed funding into small businesses.

Biden’s SBA doubles lending to minority entrepreneurs in 2023

SBA’s efforts to support the development of Black businesses and other underserved communities

The loan growth comes after considerable effort by the Biden administration to support the development of Black businesses and other underserved communities, including:

  • Expanding the Community Advantage program, which provides mission-based lenders access to the SBA’s 7(a) loan guarantees to serve small businesses in underserved markets.
  • Funding the $100 million Community Navigator Pilot Program, which supports organizations that provide outreach, education, and technical assistance to small businesses in underserved communities.
  • More than tripling the number of Women’s Business Centers at Historically Black Colleges and Universities, which provide training, mentoring, and counseling to women entrepreneurs.
  • Implementing new reforms to address persistent capital access gaps, such as simplifying the application process, removing prior equity investment requirements, and improving the online system for eligibility verification for loans below $500,000.

The role of community development financial institutions (CDFIs) in lending to Black-owned businesses

Locally, community development financial institutions (CDFIs) have been helping with the mission to increase funding to underserved communities. CDFIs are private financial institutions that are certified by the Treasury Department to provide affordable and responsible lending and investment in low-income and disadvantaged communities.

According to Kerrington Eubanks, senior managing director of strategic partnerships of Black-owned CDFI Lendistry, the combination of local CDFI relationships and new technology that allows for more flexibility are the main drivers behind the surge in lending. He said that CDFIs have been able to leverage the SBA’s loan programs and their own capital to provide more loans to Black-owned businesses, especially during the Covid-19 pandemic.

The impact of SBA loans on Black-owned businesses and the economy

The SBA loans have a significant impact on the survival and growth of Black-owned businesses, which face many challenges and barriers in accessing capital. According to a report by the Federal Reserve Bank of Atlanta, Black-owned businesses are more likely to be denied credit, pay higher interest rates, and receive smaller loan amounts than white-owned businesses, even after controlling for business and owner characteristics.

The SBA loans also have a positive impact on the economy, as Black-owned businesses contribute to job creation, innovation, and wealth building. According to a report by the U.S. Chamber of Commerce, Black-owned businesses employed 1.2 million people and generated $165 billion in revenue in 2019. The report also found that Black-owned businesses are more likely to export, innovate, and operate in high-growth sectors than the average small business.

The SBA’s data show that the Biden-Harris administration is making progress on its goal of getting more loans to minority small business owners, especially Black entrepreneurs. However, there is still more work to be done to close the racial gap in business ownership and access to capital, and to ensure that all entrepreneurs can create jobs and produce for the economy.

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