Black business owners are being denied business loans from banks despite having good credit scores and showing consistent annual profits.
According to the most recent data available from the U.S. Federal Reserve, Black business owners are denied loans by banks more frequently than any other racial group, reported St. Louis Public Radio.
St. Louis-based “sauce man” Freddie Lee James Jr. and his wife Deborah are among those Black business owners who’ve been denied. The couple says despite bringing in $200,000 annually in profit, banks will not give them a loan.
“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 said.
Statistics show Black-owned businesses are twice as likely to be denied as their white counterparts. While some say its difficult for small business to get loans in general, Galen Gondolfi said racism and discrimination in lending exacerbates the issue for Blacks.
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Gondolfi is a senior loan counselor at non-profit Justine Petersen, which focuses on helping small business get “safe, affordable loans” and build up their credit, St. Louis Public Radio reported.
“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 kind of disparate outcomes.”
Despite meeting the banks requirements, the James and other Black business owners are still denied at alarming rates. Non-profits like Justine Petersen and The Center for Acceleration of African American Business are working 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.”