Seems having good credit is not the requisite for acquiring loans anymore or is it? For Black business owners, having good credits do not warrant them getting a loan nor does have continuous annual profits.
According to St. Louis Public Radio, a new study from the U.S Federal Reserve shows that, banks deny Black business owners loans more than any other racial group.
Anyone in St Louis knows the “sauce man” aka Freddie Lee James Jr. who runs his business with his wife Deborah. Their business has been denied loans severally regardless of the fact they make $200,000 annually in profit, mogul.com reports.
“We have 750-760 credit score. … We pay all our debts. We don’t have no problems with that. But they were saying that the sauce business is not generating enough capital to their standards,” James Jr. said.
Racism and discrimination are the major reason black business owners are denied access to loans they very much qualify for, and it is that which aggravates the issue for blacks, according to Galen Gondolfi, a senior loan counsellor at non-profit Justine Petersen.
Gondolfi’s outfit seeks to help small businesses access safe, affordable homes and build up their credit.
“Let’s say, hypothetically, there’s no discrimination in the banking industry, we would still probably have disparate outcomes because the system itself hasn’t prepared us to utilize the banking system effectively,” said Gines, who is black.
“Then, when you layer on the levels of discrimination that research has showed … when you combine those two, that’s why you see these kinds of disparate outcomes.”
Also, black-owned businesses are twice as likely to be denied loans as their white counterparts, the statistics reveal.
Most of these black-owned business owners like “the sauce man” James still get turned down at very disturbing rates. Their cases have been taken on by non-profits like Justine Petersen and The Center for Acceleration of African American Business, who are working behind the scenes to help change that.
“I tell them failing to plan is like planning to fail,” said Eddie G. Davis, the center’s president and executive director.
“It’s like driving blind. … We work with them to develop their business plan, develop, for example, their target market and identify who their customers will be.”