What Minority Business Owners Need To Know About Getting Banking Loans

As major road companies continue to return after the pandemic, they face the threefold threat of supply chain winds, labor constraints and historical inflation. For some, borrowing to invest, grow, or just stay alive is the focus.

Data from Goldman Sachs’ Small Businesses on the Brink 10,000 Small Business Voices survey found that 86% of homeowners believe that broader economic trends have a negative impact on business. Nearly 30% of homeowners expect to take out a line of credit or loan for their business this year and 31% say they feel very confident about their business’s ability to access capital. But black-owned small businesses said they expected to borrow at a higher interest rate of 48%, with less confidence in their ability to access capital at 19%. The survey was released in late January, with responses from more than 1,400 small business owners, including 225 black businesses.

Business owner Letha Pugh had experience with funding inequalities that predated pandemic returns. Pugh owns Bake Me Happy, a gluten-free bakery and cafeteria wholesale and retail. When she first raised funds for the Columbus, Ohio-based company in 2013, Pugh said it was down.

“Having only a bank account is not about a bank. We were offered an SBA 7 (a) loan for a piece of equipment and it was specifically for that piece of equipment,” Pugh said. “There was no talk of working capital and things like that, I think that is disconnection.”

Letha Pugh and his wife Wendy have Bake Me Happy in Columbus, Ohio. Pugh has worked for years to build a banking relationship and a network to continue growing the business.

Courtesy: Letha Pugh

Pugh and Wendy’s wife Turning to their savings to get started in recent years, Pugh said the focus was on building a network to support the small business. It builds on local city resources, attends online seminars and participates in the Goldman Sachs 10,000 Small Business Voices program, along with courses from the National Minority Supplier Development Council and the National Restaurant Association. As the business grew, the banks tried to work with the bakery. A relationship with State Bank in Dublin, Ohio, helped the bakery gain access to Paycheck Protection Program loans early when other small businesses closed.

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“I think setting up a banking relationship as early as possible, even if it’s a $ 5,000 credit line or access to credit, just to be able to pick up the phone and address … I think you can reach out to someone “In the bank, whoever knows you and understands you, makes a huge difference,” he said.

The pandemic highlighted borrowing inequalities, with minority companies receiving funding from programs such as PPPs at lower interest rates than the white ones. The Federal Reserve Small Business Credit Survey 2021 Report on People of Color companies showed that even among companies with good credit scores, black companies were half as likely as white companies to receive all funding they were looking for at 24%. against 48% of borrowers.

Community banks were a lifeline for smaller businesses during the pandemic. Winnie Sun, CEO of Sun Group Wealth Partners, said it’s essential for start-ups to prioritize service quality over bank size. Start with a personal or business banker and arrange several meetings to make sure that person is right for your company and your goals.

“It’s very important to remember that your relationship with your bank is two-way. They want to do business with you. But you also have the opportunity to decide if you want to work with them. And that’s the key,” said Sun.

Through perseverance, Pugh continued to grow the bakery, even in the face of the pandemic’s many challenges. Sales increased by 40% compared to 2019 levels, but supply costs have also increased by 25%. Pugh just closed a building last month on an SBA 504 loan after the bakery lost its lease and the rent doubled. The new location will open in June or July.

“We sat down and decided that we would not lose money again for the construction of a space and the renovation of this space for the business owner or the owner of the building and the payment of their property taxes.… Let them benefit from the ownership of the building.” he said.

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