WASHINGTON – U.S. Senate Committee on Small Business & Entrepreneurship Chair Ben Cardin (D-Md.) convened a hearing yesterday on improving access to capital in underserved communities.
The hearing examined the Community Advantage pilot program and the Microloan program, two SBA loan programs that predominately serve minority and women owned businesses and startups. Additionally, the hearing focused on two recently proposed rule changes by the SBA intended to increase small dollar lending within the 7(a) and 504 loan programs as well as increase access to capital for underserved and underbanked small business owners.
Entrepreneurs of color operate more than 8 million businesses, generate $1.4 trillion in revenue, and employ more than seven million people. Between 2007 and 2017, businesses owned by people of color grew 10 times faster than the overall growth rate for U.S. small businesses over the same ten-year period. Yet, despite this success, entrepreneurs of color face significant barriers to accessing capital:
“Large banks approve 60% of loans sought by white small business owners, but just 50% of loans sought by Hispanic small business owners and only 29% of those sought by Black business owners,” said Chair Cardin. “Inequities like this were exacerbated during the pandemic, making it significantly more difficult for minority businesses to absorb financial shocks. This is why leveling the playing field and improving access to capital in underserved communities is a top priority.”
He continued: “Access to capital is the lifeblood of any business, but it is especially critical to small business. For too long, underserved and underbanked businesses have not had equal access to these resources. It is an enduring problem.”
The Community Advantage program has demonstrated an ability to address the credit gap in underserved communities and is an important compliment to the 7(a) program. In FY2022, Black business owners received 20% of total Community Advantage dollars and Hispanic business owners 15%, compared to 4% and 7% of SBA 7(a) approved dollars.
Chair Cardin is a longtime supporter of the Community Advantage program; he introduced legislation to make the program permanent most recently in 2022, as well as in 2019, 2020, and 2021. Senator Cardin recently released his SBA Reauthorization proposal, which included the Community Advantage Loan Program Permanency Act of 2022 along with other proposals to increase resources and capital to underserved entrepreneurs and small business owners.
Click here to watch a recording of the hearing.