Minority Businesses Shut Out of Stimulus Loans

http://news.newamericamedia.org/news/view_article.html?article_id=d40e83db3ee2eb66d27effb8a50ac34f


Loans handed out to struggling small businesses as part of President Barack Obama's stimulus package have largely shut out minority businesses -- especially those owned by Blacks and Latinos -- according to data provided by the federal government's Small Business Administration (SBA) to New America Media (NAM).

On June 15, the SBA, using money from the $787 billion American Recovery and Reinvestment Act, launched the ARC program, America's Recovery Capital, giving banks and credit unions 100 percent guarantees so they're taking no risk when they make loans of up to $35,000 to previously successful, currently struggling small businesses to help them ride out the recession.

Under the program, the borrower pays no interest and makes no payments for 12 months, then has five years to repay the loan. SBA charges no fees and pays interest to the lender at prime - the rate of interest at which banks lend to favored customers - plus 2 percent.

The Obama Administration does not report the racial breakdown of who's benefiting from these loans at Recovery.gov, but data obtained by NAM from the SBA found that of the 4,497 ARC loans where the race of the borrower was reported, 4,104 (over 91 percent) went to white-owned firms, 140, (3 percent) went to Hispanic-owned businesses, and 151 (3 percent) went to Asian- or Pacific Islander-owned businesses. Only 65, (1.5 percent) went to black-owned firms.

Overall, white-owned businesses received over $130 million in loans through the program, while Hispanic-owned businesses got $4 million and black-owned businesses less than $2 million.

In five states - Alabama, Arkansas, New Hampshire, South Dakota, and Wyoming -- every single firm that received an ARC loan was white-owned. In eight other states, including Louisiana and Nevada, all but one loan went to a white-owned firm.

went after those loans? That's the real question. Compare the number of blacks who applied against the number of blacks who were approved. That one has to ask, what was the criteria for approval?

For instance, blacks tend to vote disproportionately democrat (which is the TRUE democratic base)when compared to their population.Although there are more whites in the democratic party .

After this weekend, with all the threats that number should be decreasing. Yeah right.

'credit based'...:shrug: How can we know for sure?

Heres more: I'm hoping they will investigate this more...

At the SBA in Washington, spokesman Jonathan Swain argued racial disparities in the ARC loan program don't paint the full picture of the agency's lending practices. Many of the SBA's other loan products, he says, have large minority business participation. For example, he says, minority-owned businesses receive 29 percent of loans given through the SBA's regular lending program and 37 percent of Microloans doled out by the agency.

"It's hard to look at the ARC program by itself," he told NAM. "It's just one tool in the tool box, just one tool in the array to help small business in these tough economic times."

One reason for the extremely low level of minority participation in the ARC loan program, he maintains, is that the Recovery Act specifically prohibits the agency from allowing an ARC loan to be used to refinance a regular SBA loan, which minority firms are more likely to have.

That explanation isn't enough for minority business and civil rights groups, however.

Sellstrom of the Lawyers Committee for Civil Rights isn't convinced by that argument. "You would think that minority owned firms could use $35,000 for a lot of uses other than paying down SBA loans."

Sellstom said SBA's response only underscores the need for further investigation. "It's often the case that the first explanation leads to further questions," he said.

Javier Palomarez, the president and chief executive officer of the United States Hispanic Chamber of Commerce, says the ARC loan program was poorly designed and "destined to fail."

When Congress was drafting the stimulus package, Palomarez said, his agency and other minority business groups argued the severity of America's recession should have led to the government handing out loans to struggling small businesses directly - rather than simply backing up loans from the very banks that caused the country's economic recession.

^^ The last sentence says it all...that's how the loans should have been handled.

and definitely need to be followed.