Report reveals best lenders for black business: findings lead to renewed calls for public analysis of SBA loans

Black Enterprise, Nov, 2005 by Glenn Townes

Report cards are out, and lenders are learning whether they are making the grade. A study released by the Greenlining Institute, a public policy research and advocacy group based in Berkeley, California, ranks the nation's financial institutions for Small Business Administration loans to minorities.

The report, A Long Way to Go: The Bush Administration and 2004 SBA Lending by the Nation's Largest SBA Lenders, ranked lenders with more than $50 billion in assets that made more than 200 SBA-backed loans in fiscal year 2004. Topping the list of total dollar amount loaned to African Americans are Bank of America, with $24.3 million (out of almost $177 million in SBA loans), and JPMorgan Chase, with $13.1 million (out of nearly $66 million in SBA loans).

The lowest ranked banks are Fifth Third Bancorp and Wachovia Corp., each with $1.8 million in loans to African Americans (out of almost $13 million in SBA loans and almost $7 million in SBA loans, respectively).

The SBA data does not reveal the size of the businesses that receive loans or the number of loan applicants. However, the data does reveal the average dollar amount of each loan given: Asian Americans received $246,245 on average, while Latinos received $128,750, and African Americans were loaned $87,032.

The Greenlining Institute, which emerged from one of the oldest coalitions of African American, Asian American/Pacific Islander, and Latino community leaders--the Greenlining Coalition--hopes to encourage competition among the nation's largest SBA lenders and give minority business owners a heads up for the best places to get money for their business. In addition to obtaining data from Websites and public records, the Institute submitted a formal request to the SBA for specific data under the Freedom of Information Act.

Vina Nguyen Ha, program manager for economic policy for the Greenlining Institute and author of the report, says the study was developed in response to the SBA's continued refusal to publicly report and analyze the issue of small business lending to minorities due to Regulation B. The 1973 mandate strictly prohibits financial institutions from collecting and disseminating small business lending data based on race, ethnicity, or gender.

"This problem is further compounded by the Bush administration's continued cuts in SBA funding," Ha says. "The slash-and-burn approach to the SBA's budget cast serious doubt on the agency's ability to work with financial institutions to make more loans available to minority-owned businesses."

President George W. Bush's FY 2006 budget cut funding for the SBA by $17 million from FY 2005 and $164 million, or 22%, from FY 2004. For the second year in a row, the budget calls for a zero subsidy for 7(a) loans, the SBA's largest small business loan program. The program will run solely off fees, including a 2006 fee increase, substantial]y raising the cost for small businesses that use the program.

"There is definitely a disparity between loans we originate from minority small businesses versus nonminority small businesses," says Arthur Braun, vice president of First Financial Equities Commercial Inc., a mortgage lender that does SBA loans through its commercial department in Englewood, New Jersey. "Lenders in general are not in tune to the special needs of minority small businesses." Braun says the findings should implore SBA officials to re-examine their lending guidelines and how statistical information is generated.

He adds that there is much room for improvement, even for the best bank performers in the study. "We would like to see 60% of al SBA loans go to minorities--20% to African Americans, 20% to Asian Americans, and 20% to Latinos," he says. In 2004, African American-owned firms received just 3% of al SBA loan dollars, and Latino-owned firms just 7%.

GREENLINING INSTITUTE'S REPORT CARD

SBA Lending (Dollar Amount)

Top Two
African
Americans

1. Bank of America       $24,288,800

2. JPMorgan Chase        $13,123,600

Top Two
All
Minorities

1. Bank of America       $176,680,100

2. Comerica              $146,247,800

Bottom Two
African
Americans

13. Fifth Third Bancorp  $1,819,848

14. Wachovia Corp.       $1,810,000

Bottom Two
All
Minorities

13. BB&T Corp.           $10,337,000

14. Wachovia Corp.       $6,991,150

SBA Lending (Percentage of Loans

Top Two
African
Americans

1. M&T Banking Corp.     8.3%

2. BB&T Corp.            7.2%

Top Two
All
Minorities

1. HSBC USA Inc.         49.0%

2. Bank of America       40.0%

Bottom Two
African
Americans

13. Wells Fargo          2.6%

14. Fifth Third Bancorp  2.2%

Bottom Two
All
Minorities

13. National City Corp.  13.0%

14. Fifth Third Bancorp   9.0%

A LONG WAY TO GO THE BUSH ADMINISTRATION AND
2004 SBA LENDING BY THE NATIONS LARGEST SBA LENDERS