According to local small business owners, help was nowhere to be found during the COVID-19 pandemic. After long-term relationships with large banking institutions, many small business owners found their bankers to be unresponsive or slow to respond to requests of assistance with the SBA loan requests and additional support during this financial crisis. Black Businesses already receive few business loans than their white counterparts. The COVID-19 pandemic further exasperated these disparities.
Large banks have saturated the south and west sides and many African American’s bank at these locations because it is convenient and cost-effective, especially when using ATMs and avoiding fees. The same rings true for black business owners. The abundance of banks in the area makes it easier to make deposits and conduct day-to-day business banking. However, when the pandemic hit, many black-owned businesses were shut down due to a mandatory stay at home order. For over three months, many of these businesses were left without revenue to pay operating expenses, utilities, rent, and payroll. Their employees were also left without an income to provide for their families.
SBA PPP, EIDL loans, and additional relief were critical to the survival of these business owners. Many were denied by their lenders and had to look to third-party lenders or agencies for assistance. One business owner, who chose to remain anonymous, has banked with Chase bank for 15+ years. He owns a profitable and growing business in the South Suburbs but was denied assistance and eventually received help and funds through Accion. So while large banks were posting #BlackLivesMatter and giving employees 3/5 is of a holiday for Juneteenth, where was the real help for the black businesses that have held deposits and loan accounts in these large banking institutions?
While the Community Reinvestment Act (CRA) was created to ensure financial institutions met the credit needs of those in the communities that they serve, recent reports suggest otherwise. According to a recent investigation by WBEZ and City Bureau,”98% of banks receive passing CRA grades by the government, but lenders in Chicago put 8.4 times more money in white communities than black communities…a pattern that locks residents out of homeownership and deprives communities of capital investment…” Why are so many large banks in our communities yet they do not reinvest in them? When banks do not lend the money they make in deposit relationships to reinvest in the community via business loans, homeownership, etc., entrepreneurs and business owners suffer because they are not able to secure capital. This results in a potential loss of new businesses in the community.
Is Your Business Bankable?
Is your business stable enough to ensure profitability? Most entrepreneurs, especially ones just starting, unfortunately, are not. Having enough profit, assets, and liquidity to qualify for financing or to secure funding is key to being desirable as a banking client and becoming bankable means, managing your business, developing your banking relationship, improving your personal and business credit scores, and organizing your financial documents and bookkeeping records.
Organizations like the Small Business Administration, Accion, offer training, counseling, and assistance for small businesses and entrepreneurs. Websites such as BlueVine, Centerstone SBA Lending, Intuit/QuickBooks Capital are non-bank lenders who are also accepting PPP loan applications.
The Banking Relationship
Many larger banks would not accept PPP Loan requests if you were not a customer of that bank. If business owners learn any lesson during this crisis, a relationship with your banker is critical and goes beyond opening an account and making deposits. Your banker should visit you and your business, suggest new products and services to help your business grow and get regular updates via financial statements and documents that show your business growing and being profitable. Business owners have to be proactive in developing their relationship with their banker and/or lender and holding their lender and bank accountable to providing the services a bank is supposed to.
It was frustrating for many business owners to see so many larger companies receiving financial assistance easily and quickly. Initially larger banks received more funding and prioritized customers with existing relationships and clients who wanted larger loans. At the same time, they struggled to get their applications in front of someone to approve. Some small business owners have discovered a more personal experience using their smaller local community banks. Check to see what services are offered with your banking relationship. Does the bank offer products and services that allow your business to grow? With some large banks, clients become numbers instead of people.
You want your money with a lending institution that knows you, your business, and the community it resides in.
Contributing writer, Danielle Sanders, lives in Chicago and can be found on social media @blkwidowsweb and www.blkwidowsweb.com.