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Economy Woes Enlarge Credit Crunch For Black Businesses

   Since an April survey on lending practices from 56 U.S. banks found that about half of all domestic banks have tightened lending standards, experts say black businesses should pay careful attention to their bottom line.
    Moreover, a Federal Reserve report released this week underscore the increasing difficulty that small business owners are facing in securing loans during the current economic climate.
   “On average, it’s difficult for black business owners to get access to capital; but, when we have downturns in the economy it becomes especially hard,” said Reginald Gates, president of the Dallas Black Chamber of Commerce. “Without access to capital, entrepreneurs are finding it difficult to expand and even compete for some contracts.”
    However, the recent belt-tightening by lenders has caused some congressional members to introduce legislation.

    For example, Sen. John F. Kerry (D-Mass.), chairman of the Committee on Small Business and Entrepreneurship, introduced the Small Business Lending Stimulus Act in February.

Posted May 14, 2008

The bill would increase funding for micro loans--loans up to a maximum of $35,000--which proportionately benefit under served communities, including women and minorities, more than traditional loan programs, Kerry says.
    Legislation and access to capital will level the playing field,said Roby S. Williams, president and CEO of the Black Business Association in Memphis.
   “Banks don’t finance dreams,“ “They finance businesses that are likely to be successful.” That means business owners will need to show that their companies have a good financial track record or a solid business plan, he said.
    For smaller businesses, personal creditworthiness is more of a factor these days. “When you get to the smaller businesses, their personal money is oftentimes the same as the company money,” Gates said. “So if they’re impacted personally from a credit score standpoint, it’s going to impact them professionally in their businesses.”

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