Valley nonprofit launches loan program for African-American small businesses

The Valley Economic Development Corporation (VEDC) and JP Morgan Chase have launched a new loan program specifically for African American-owned small businesses.

The National African American Small Business Loan Fund will give loans that range from $35,000 to $250,000 to small businesses in Los Angeles, New York, and Chicago.  The fund will start with $3 million in seed money from JP Morgan Chase, but VEDC President Roberto Barragan said he plans to "leverage" that to raise another $30 million.

 The VEDC says that while African Americans are the fastest growing segment of small business owners in the country, business loans to African American entrepreneurs have yet to rebound since the economic downturn.  

"Post financial crisis, bank lending and Small Business Administration lending to African-American businesses is still at an all-time low," says Barragan.  

One challenge, says Barragan, is that black businesses often need smaller loans than their Latino, Asian, and non-minority owned counterparts do.

"They need loans of between $50,000 and $150,000," he explained. "At the end of the day, it costs as much to do a $100,000 loan as it does to do a million-dollar loan so banks simply aren’t making those loans." 

Janis Bowdler,  Head of Community Development for Global Philanthropy for JP Morgan Chase said in working with community financial institutions like VEDC, the bank discovered the recession was particularly tough on African-American entrepreneurs.  

"Many of them saw their businesses harmed or had challenges with their personal balance sheets that are now making it hard for them to overcome traditional credit hurdles," Bowdler told KPCC. 

The VEDC's Barragan says a key part of the new loan program is offering technical assistance to the small business owners as they're applying for the loans.  Another challenge  many small African-American businesses face is in preparing the necessary paperwork.  

"The quality of their financial statements and the quality of their tax returns is less," Barragan told KPCC. "So they're simply less prepared to go to somebody and say, 'please lend me $150,000 per year.'"