Limiting access to online loans will hurt black entrepreneurs
By Richard Holt
We desperately need more growth to rebuild the post-COVID US economy. Yet the Liberals are hard at work waging war on business in general, and on minority entrepreneurs in particular.
While large businesses have fewer problems applying for and receiving loans, the hundreds of thousands of black Americans who are self-employed or run small businesses are not so lucky. The anti-growth agenda of the left is once again preparing the black community for failure.
The latest stumbling block for black Americans comes as the left moves to ban online lending. Online loans can be the lifeblood of black start-ups, especially those in need of quick infusions of cash. Considering that black people are culturally suspicious of a banking industry that has treated them unfairly in the past, the proposal to cut a sector that has been useful is embarrassing.
Studies have shown that black people are 80% more likely to be denied their mortgage. Business loan rates are doing a little better according to the Federal Reserve, where only 47% of blacks are denied business loans. However, when loans are approved, they often do not match the amount actually needed.
Analysts say white business owners have traditionally enjoyed access to capital because of a lack of discrimination in lending. Yet it is the amount of capital that matters most. Black start-ups face higher failure rates because they don’t have access to all the capital they need to get started.
Even taking into account factors such as creditworthiness, education, and type of business, all minority groups were significantly less likely than whites to obtain business loans. To add insult to injury, the loans black people receive always had higher interest rates and higher refinancing fees overall.
What to do about discrimination in the loan process? Offering fewer options is not the right way.
Online lenders extensively use a variety of data analyzes to decide on their loan process which can take into account factors such as race and gender. Black people are turning to online lenders. Not just for convenience, but because we all know traditional banks won’t be so responsive.
To bridge the gap between required capital and ability to borrow, black businessmen tend to rely on credit cards to get through tough times. The build-up of credit card debt continued to plague black Americans in general who continually rely on this type of credit. In fact, 99% of black business owners say they rely on credit cards to pay for their expenses – while only 80% of whites do.
The accumulation of wealth – or the lack of it – hinders the overall advancement of black people. The red line, segregation and racism have crippled the advancement of black people as a whole. Despite these setbacks, black America can catch up, but not by limiting options. Instead, America should welcome and embrace 24/7 loans online.
First, online lending must continue to be an option to ensure black people and all other groups have access to capital for start-ups. Second, we should consider expanding the areas of opportunity that will encourage investment in inner-city communities.
A third solution would be for the black community to finance its own start-ups. There are enough black businessmen in America with the skills and resources to lend their expertise and capital to other black businesses.
An increase in black lending institutions will also create a ripple effect throughout the black community and ensure that wealth is widely attained in our community and beyond. But, as long as the community continues to elect politicians who sabotage our progress, there is little else that there is really much to help them.
Richard Holt is a member of the Project 21 Black Leadership Network