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In recent years, President Joe Biden’s administration has promoted several programs aimed at making it easier for business owners, particularly business owners of color, to obtain loans.
Many of the programs are designed to make more funding available to community banks and credit unions that serve disadvantaged groups, as well as to provide technical assistance to business owners who want to take advantage of these programs. Masu.
However, the overall lending environment has tightened in recent years. That makes it especially difficult for people of color to get the funding they need to run their businesses.
Nicole Davis, owner of Atlanta-based Butler Davis Tax & Accounting, said that as an accountant who works with small and medium-sized businesses, black business clients typically have limited assets and therefore have difficulty obtaining financing. said it was difficult.
“People of color, we didn’t have the assets and resources to be passed down from generation to generation to develop our businesses,” she said.
Currently, high interest rates are making it more difficult for people with low assets to get a loan. That could pose a challenge for lenders like Carver Financial Corp. in Alabama and Georgia, which focus on lending to disadvantaged groups.
“We take on additional risks because we lend to low-income communities,” said Robert James II, Carver’s chief executive officer.
Mr. James takes advantage of federal programs such as the Emergency Capital Investment Program and the State Small Business Credit Initiative, which are designed to reduce risk for lenders like his by providing a larger pool of loans.
“This is so that we can extend with confidence in a situation where there may be a little bit of uncertainty in terms of a borrower’s ability to repay,” Mr James said.
The problem is that interest rates are still rising.
These programs can help business owners obtain loans, but they don’t necessarily make loans more affordable, said Brett Theodos, director of the Urban Institute’s Community Economic Development Hub. said.
“Almost all policy efforts are geared toward mitigating risk, rather than fundamentally lowering interest costs and debt burdens,” he said.
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