By Sen. Ben Cardin
In 1977, former Congressman Parren Mitchell fought to pass an amendment to a $4 billion federal public works program requiring city and state recipients to set aside 10 percent of the funds for minority-owned businesses. Congressman Mitchell would go on to call the amendment his “proudest congressional accomplishment.”
Congressman Mitchell understood that any plan to shrink the wealth gap in America must include entrepreneurship, and that the federal government has an important role to play in helping minority entrepreneurs overcome the historic, pervasive challenges they face.
Capital is the lifeblood of small businesses. For too many minorities and other underserved entrepreneurs however, difficulties in accessing capital often leave their dreams of business ownership and expansion unfulfilled, because more often than not, they have less wealth to use to fund their business.
The median Black family has $1 in wealth for every $10 a white family has, while the median Hispanic family has roughly $1.20. Likewise, women have roughly $3 in wealth for every $10 men have, placing minority women in a double bind that can feel insurmountable.
This wealth gap is exacerbated by systemic inequalities in lending. Minority-owned businesses are more likely to be denied business loans, and women-owned businesses are significantly less likely than men to be approved for business loans.
This issue is particularly important in Maryland, where we have the country’s highest concentration of minority- and women-owned businesses.
The Small Business Administration (SBA) exists to help solve the unique challenges faced by small businesses. In recent years however, the 7(a) Loan Program, which provides affordable capital to small businesses that can’t get it otherwise, has reflected the inequities that exist in the private market instead of solving them.
As the top Democrat on the Senate Small Business Committee, I have been working to find solutions to empower minority entrepreneurs to start and expand their businesses.
I recently introduced two bills that I am confident will create opportunities for underserved entrepreneurs in Maryland: the Closing the Credit Gap Act and the Unlocking Opportunities in Emerging Markets Act.
The Closing the Credit Gap Act would make the 7(a) Community Advantage (CA) Pilot Program permanent and expand the categories of eligible businesses to include women and other socially and economically disadvantaged entrepreneurs, regardless of business location.
The Obama Administration created CA in 2011 to increase lending to underserved entrepreneurs. The program has remained a vital complement to 7(a)—repeatedly demonstrating it is more capable of getting capital to underserved entrepreneurs.
During Fiscal Year 2018, 12 percent of all CA loan approvals went to Black borrowers compared to only 4.5 percent of 7(a) loan approvals. Similarly, Hispanic entrepreneurs received 17 percent of all CA loan approvals, while receiving only 8.5 percent of approvals in the 7(a) program; and women received nearly one out of every three CA approvals, but less than 1 in every 5 in 7(a).
CA lets nonprofit lenders—who have strong relationships in the communities they’re serving—make 7(a) loans.
Harbor Bank Executive Vice President John Lewis stressed the value of relationship lending during a Small Business Committee field hearing held at Morgan State University last September. He said that lenders working with minorities and other underserved communities need to “understand borrowers, not only where they are going, but where they have been.”
Despite the historical capital roadblocks that minority entrepreneurs must overcome, SBA does not have a coordinated effort to address them. My Unlocking Opportunities in Emerging Markets Act would ensure that SBA gives these problems the attention and resources they warrant.
My bill would create an Office of Emerging Markets to oversee SBA’s loan programs targeted to underserved entrepreneurs, including CA, and coordinate and lead SBA’s efforts to help underserved entrepreneurs access the capital they need to start and grow businesses.
The Office of Emerging Markets will make sure that the needs of minority and other underserved entrepreneurs are always a priority at SBA so the agency can understand, as Mr. Lewis urged, where underserved entrepreneurs have been and what they need to help get them where they are going.
Congressman Mitchell understood that the federal government has a duty to support underserved entrepreneurs, and as a result of his efforts, minority, women, and other underserved entrepreneurs have made great strides.
But the work is far from finished. It is now up to us in Congress to build on Congressman Mitchell’s legacy by giving SBA the tools it needs to help more underserved entrepreneurs overcome barriers, start successful business, and create jobs.
Ben Cardin is a Democrats who has represented Maryland in the United States Senate since 2007. He is the Ranking Member of the Senate Small Business Committee.
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