While the ability of small businesses to obtain capital has improved in recent years, getting a traditional bank loan is still a tough obstacle, a new study finds.
The Black bank has played an important role in funding Black entrepreneurs, businesses and institutions, sustaining the Black community and helping individuals when other banks turned a blind eye. This Juneteenth–the commemoration of the end of slavery and the beginning of freedom and independence for African-Americans–provides an opportune time to examine the role of that Black financial institutions have played and continue to play, the ways in which integration impacted the economic ecosystem, and the challenges and opportunities facing Black banks.
For some African American-owned businesses like Dooky Chase's in New Orleans, black banks have provided lifelines, but a disconnect exists for younger entrepreneurs who could benefit.
An FDIC report last month found that half of all African American and Latino households are disconnected from the formal financial system, compared to one in five white households. This means blacks often pay more to cash checks, buy money orders and conduct other transactions.
Over the past 5 years, nominal (not real) GDP grew 20 percent; not great, but positive. However, over the same period, government debt grew over 30 percent, indicating that government is taking a larger share of available funds in the economy. Corporate credit also grew over 30 percent while credit to households and small businesses grew by less than 10 percent (Flow of Funds, Federal Reserve). This suggests that the bulk of credit available has been allocated to governments and large corporations, not to the small business sector, the engine of growth.
With the rise of alternative lenders, lending standards have changed significantly from where they were even just a few years ago. Now, it’s not only easier for small business owners to qualify for a business loan, it’s easier for them to actually apply. So even though you might think you know all there is to know about small business loans, you might be surprised.
An online, fast-decision loan funded as soon as the next business day and offers a competitive interest rate to small businesses with short-term credit needs is now available from Wells Fargo.
FastFlexSM Small Business Loan, an innovation built in-house by Wells Fargo, will be available in late May to existing customers, and joins the Wells Fargo family of small business products and comprehensive support offered through Wells Fargo Works for Small Business®.