Before the recession, black-owned small businesses received 8.2 percent of all loan money through the Small Business Administration (SBA). That figure is now down to 1.7 percent, according to an analysis by the Wall Street Journal. The total volume of loans they are currently getting is similarly low: 2.3 percent of the roughly 54,000 doled out through the agency, down from 11 percent in 2008.
Other groups have fared better. Hispanic business owners are getting 4.7 percent of total loan volume, similar to the 4.5 percent rate they saw in 2009. About 7 percent of American business owners are black, compared to 10 percent that are Hispanic.
“SBA loans are a crucial source of financing for many entrepreneurs, who generally can borrow as much as $5 million to start, buy, expand or run a small business through the agency’s two biggest programs,” the Journal writes. Given that the agency will cover as much as 85 percent of any losses a bank would incur on the loans, financial institutions are more motivated to make them.
A few factors could be driving the drop in lending to black-owned businesses. Many lenders are shying away from smaller loans, which can generate less profit through interest. The average SBA loan has more than doubled since 2005, rising from $192,919 to $426,796. This will be a problem for black borrowers, as 80 percent of the loans to black business owners are for $150,000 or less.
