Black and Hispanic Entrepreneurs Face Discrimination When They Apply for Small Business Loans

By Marilyn Silverman

You’re standing on line in your neighborhood bank. You want to start a small business, or you want to expand a growing business. Business ownership is the name of the game; it’s the American Dream. Small businesses are the lifeblood of our economy—the government is always telling us. Well, someone ought to tell this to the banks out there, since they’re making it difficult, if not impossible, for Blacks and Hispanics to share a piece of that pie and obtain that loan.

Whatever, you don’t have the wherewithal to invest in yourself. What do have, however, is a dream. It’s a truism that banks tend to approve small business loans.  You’re a business owner, so ipso facto, your neighborhood bank should approve your loan application.

Well, I’m going to paint you a depressing and shocking scenario that is being played out in banks today across America, the land of opportunity, but not for all. You possess practically the duplicate credentials of that white entrepreneur who is standing directly in front of you or directly in back of you in your neighborhood bank. You both possess a professional demeanor in your attire—no jeans, T-shirt or running shoes today. You both possess the identical education credentials. You are both requesting $60,000 loans for the identical business genre. That’s all you need to launch your business. Furthermore, you both possess the same credit history and credit score. The only difference is the color of your skin which should not make a difference but shockingly  and deplorably, it does. 

You want to go to college, get a job and get an apartment—all the ingredients of a successful quality of life that every man and woman living in the U.S. deserves. But we all know that Blacks and Hispanics face discrimination in these areas. Now, there’s a shocking milestone—for the first time ever—discrimination has invaded the marketplace.

A study was conducted by three business school professors from three respected universities—Jerome D. Williams (Rutgers), Glenn L. Christensen (Brigham Young) and Sterling A. Bone (Utah State), “Rejected, Shackled, and Alone: The Impact of Systemic Restricted Choice on Minority Consumers; Construction of Self” and published in the Journal of Consumer Research.  The academics utilized an interesting experiment —they recruited three Blacks, three Hispanics and three whites to amass their shocking and deplorable findings by sending them into banks as mystery shoppers, posing as business owners needing loans.  “Our research offers evidence against the general assumption in the United States that choice is equally distributed, democratized and available to all,” the authors wrote.

We have the global reputation of being the land of opportunity which justifies the massive influx of immigrant to our shores. But not everyone can enjoy these opportunities.

Unbeknownst to that Black or Hispanic business owner in that neighborhood bank on a crisp morning, is that he is going to be the beneficiary of less information vis-à-vis his white counterpart and is going to be asked many, many, probing questions.   He will receive far less information on the loan terms and requirements which is dominated by a plethora of facts and figures. Business owners should be able to put their faith and trust in the bank, confident that they can explain its many provisions and clauses.  

Will he be handed a business card that as per business etiquette occurs at the end of the meeting signaling that they will be embarking on a long-term relationship?  Not very likely.  But they can most certainly be assured of unpleasantness –their personal financial status will be probed and furthermore, they are not likely to have that loan request approved. And, according to Alicia Robb, co-author of the Kauffman Firm Survey, Black and Hispanic entrepreneurs are less likely to even apply for loans for fear of rejection.

According to the SBA’s Office of Advocacy, the Federal Reserve and the U.S. Department of Commerce Minority Business Development Agency, Blacks and Hispanics are compelled to pay higher interest rates that takes quite a sizable bite out of their profits.

These insurmountable barriers to secure funding may have a detrimental impact on the budding entrepreneur’s quest to start their business or on the long- term success of an existing business.  The collaborators on this study, wrote, “Not only does restricting a person’s choice threaten the success of a new business, it also has…damaging effects on the individual’s self- esteem and their personal sense of control and power in the world.”

According to BizBuysell.com, in today’s economic climate baby boomers are increasingly facing retirement and increasingly the face of their buyer is Black or Hispanic—that is wonderful news but how is that Black or Hispanic business owner going to be able to buy that business without a bank loan?

It is indeed brutal for Black and Hispanic business owners in their quest to get a loan; as The Washington Post said, they “are treated significantly worse than their white counterparts …even when all other variables—their credentials, their companies, even their clothes—are identical.”

Student Loan Mistakes

You don’t think you qualify for financial aid.
So many college students don’t even bother applying for financial aid because they don’t think they can qualify, but that is a huge mistake. You are passing up the opportunity to see if you qualify for grants, which is free money for college that you do not have to pay back. Even if you don’t qualify for a grant, you can qualify for federal loans as opposed to private student loans which come at a lower interest rate. You’ll also find out if you qualify for work study, which is an opportunity to work on your college’s campus to earn money. You forget or miss the deadline for the FAFSA.

To find out if you qualify for this financial aid, you must fill out the free FAFSA. You’ll need information about your income and possibly your parent’s income as well as assets. There is a deadline to filling out this information, and it needs to be done either every year or semester, depending on your college. The sooner you fill out the FAFSA, the better because once this financial assistance is used up, it’s gone.

You have the “borrow now, earn later” mentality.
In my opinion, a lot of the problems with student loans come from the idea that you can borrow as much as you want because in just a few years you’ll be earning a steady, good salary and pay it back with ease. Unfortunately, this isn’t always the case. A lot of recent graduates struggle to find a job once they graduate, or even when they do, it’s not the salary they expected. Plus, even if you do land a job, shelling out a good portion of your hard earned income stings every month. Be conscious of the money you are borrowing, and do everything possible to reduce what you will owe.

You take out more loans than needed.
Going along with that same borrow now, earn later thought, many college students take out extra loans. Hey, what’s an extra few thousand each semester to be able to live in a nicer apartments, buy some new clothes, take a vacation, or simply have more fun with friends? I get it, but it’s not a good idea. Those extra loans add up quickly, and you’re paying interest on them. Once you’re done with school, working, and trying to pay off those loans you’ll realize those extra loans weren’t worth it.

You take more classes than you need.
Depending on where you’re headed to college, one single class can cost hundreds or even thousands of dollars. Taking classes you don’t need to graduate, is a horrible financial mistake. This is a common occurrence when people change their major. It’s tricky because you aren’t just going to stick with something you realize isn’t a good fit for you. To avoid this, really think about your major before you start taking classes for it. Sit in on classes, meet with advisors, talk with professors, shadow people in your field, and do plenty of research on the job outlook, what the job entails, and other working conditions including salary. This way, you aren’t making a rushed decision on a major. Another reason why people take classes they don’t need, is they aren’t quite sure and take something on accident. Requirements for colleges are constantly changing, so it’s a good idea to meet with an advisor in your major’s department every semester to figure out what you should be taking.

You don’t apply for scholarships.
Scholarships are free money used to apply towards your college education. Many people don’t think they’ll qualify for any scholarships or simply don’t want to take the time to apply. But you never know if you can qualify for a scholarship. You can find scholarships offered through your college, city, state, private organizations, community groups, professional organizations, and much more. Ask your college’s student finance service department on what scholarships your school offers and advice on where to find more.

You don’t stick to a budget.
Just because you’re in college, doesn’t mean you shouldn’t be trying to stick to a budget. Know where your money is going. You might be shocked to learn what you’re spending on coffees or grabbing a quick bite with friends. Go back over the last three months to see what you spent on food, gas and transportation, entertainment and going out with friends, and all of your other bills, like cable, electric, and rent. See what the average cost was. It might be more than you anticipated. Try to find ways to cut all of those costs down. Make an amount that you’re comfortable spending and stick to it by keeping track of your spending and finding ways to cut costs.

You don’t really understand how the student loans work.
That saying ignorance is bliss is somewhat applicable to student loans, at least while you’re still in school. It may sound irresponsible, but it’s pretty common for people just to blindly take out the loans, not realizing what they’re paying in interest and what they will actually owe once they get out of school. Even if it’s difficult to accept, really understand what you’re borrowing, the interest, and what the payments will be when you graduate.

You drop classes.
Two weeks into the semester and you realize you don’t like your professor, you’re having issues in your personal life, or you don’t like the class. Things happen, but once you drop a class, you’re still paying for it if it passed the deadline to which you can drop it without a fee. Before you register, be sure you know the specific date and time when you can drop a class without any fees or penalties.

How NACC's Small Business Solutions Helps Your Business

– by Marilyn Silverman

Are you an entrepreneur who is frustrated and perplexed and simply overwhelmed by the plethora of rules and regulations out there and are just at your wit's end since you don't have the foggiest idea who you can turn to for help? You took a huge step and exited the world of 9-5 and are now anxious to attach that Open for Business sign on your retail establishment. But before you climb that ladder you must make an appointment with the New American Chamber of Commerce Small Business Solutions. NACC's Small Business Solutions consultations are facilitated through the Law Firm of Figeroux & Associates. We have the answers. We have the expertise. We have the knowledge. We have the experience. And we have compassion and respect for the small business owner who wants to achieve the American Dream of business ownership. Here's how we can help:

If you are running a home-based business which incidentally is a very popular business genre today—your office can be but a few steps away in your kitchen, bedroom, basement, attic or wherever —you might just qualify for home business tax deductions. You just started your business and already we're saving you money.

If you are operating a business you will need an accountant to help you pay your taxes every year; all those pages and pages with the tiny print, are time-consuming. Who has the time?

If you are a savvy entrepreneur you will most certainly want to avoid the unpleasant and scary experience of being audited. Who wants to meet with the IRS?

If you are in business with a colleague, you will need a partnership or shareholders agreement. A handshake is not enough even if your business partner is your spouse. You should be knowledgeable about the most preferred legal structure for your business, e.g., sole proprietorship, corporation or LLC.

You should formulate a business plan which is an absolute prerequisite for every single business owner—this is needed when you are hunting for funding sources; e.g. banks or venture capitalists. You certainly are not going to dip into your pocket for cash.

You should decide what type of accounting software that would be most appropriate for your business. Is QuickBooks the right choice?

You should either handle your bookkeeping and accounting in-house or outsource it; the latter is a cost-effective strategy since you won't have to hire full-time staff to perform this vital function.

You should make a determination as to who should control your business's checkbooks.

You should be aware of your sales tax responsibilities.

You should have an expert review your franchise agreement in the event you are interested in exploring opportunities in the exciting and lucrative world of franchising.

In summation-- under one roof, Small Business Solutions incorporates the expertise and experience of a Legal Department, a Tax Preparation and Audits Department, an Accounting and Bookkeeping Department, a Franchising Department and a Collections Department—all of the departments that will enable you to focus all your energy on attracting customers and watching your business grow. Just imagine, you are a small business and yet, you will enjoy personalized attention from departments that are an integral component of Big Business. That's how NACC's Small Business Solutions helps your business. To set up an appointment for a Small Business Solutions consultation, call 718-834-0910.

5 Ways to Jump-Start Your Credit Score

It's a common financial predicament for most 20-something-year-olds: You need credit to get credit. But even if you're older and have been through some credit-wrecking havoc in your life, you could face the same issue. "The only way to build a credit history is to use credit," explains Maxine Sweet, Vice President of Public Education at the Credit Bureau, Experian. So here are five easy steps to help get you started.

* Know the score: Figure out what credit history you've established. Even if you've never had a loan or credit card, there's a good chance you have information on your credit reports that has been compiled by the three major credit bureaus: Equifax, Experian and TransUnion. For instance, Experian now collects rental payment histories, so some landlords submit reports to credit bureaus.

Under federal law, the three credit agencies are required to provide you with a free report every 12 months. We suggest taking advantage of your free annual report from AnnualCreditReport.com. Your credit score isn't included in your free annual credit report. In most states, the credit bureaus each charge around $10 for your score.

The higher your score, the lower risk you are to lenders and insurers. This means you'll generally have a better chance of receiving credit along with lower interest rates. Be aware that this allimportant number, which ranges from around 300 to around 850, can vary depending on the scoring model used by credit agencies and lenders.

* Research your choices: If you have little or no credit history, your choices for loans or credit cards may be limited. Retail or gas cards, and loans secured by property, such as furniture or a car, may be easier to get. You may start by asking your parents, or someone else with good credit, to co-sign on a low-limit credit card with you.
Your bank or credit union may provide another alternative. Sometimes they offer special programs for customers who need to establish credit.This can be a great way to help build credit history.

* Establish a track record: Once you have some credit accounts, it's important to use but not abuse them. It may be counterintuitive, but if you don't use credit, you won't be able to build a solid history.

* A good habit: Use your card to make small purchases and pay off the balance each month. "By charging a small amount on at least one card and paying the balance on time and, ideally, in full, you'll show that you can manage credit without charging more than you can afford to pay," Sweet says.

* Use credit wisely: If you want to be a credit superstar, follow two basic rules: Pay on time and don't go over your credit limits. For those just starting out, this is even more critical. It is important to start carefully. At this point, you don't have a long and distinguished track record that can help alleviate the impact of a small mistake, so tread carefully. Using credit responsibly means you use and pay off your cards monthly, make payments on time every time, don't apply for numerous accounts and check your report periodically.

Don't make these mistakes:
* Applying for several lines of credit and loans within a short period of time can give lenders the impression you're in desperate need of money and may have trouble paying back the debt. Keep your number of applications at a minimum and only go for the opportunities that offer the best deal.

*Part of your score is based on the amount of credit you have available but aren't using. The lower your balance (in proportion to the credit limit), the better.

* If you decide you no longer need a particular account, don't close it. The age of your accounts affects your score, so keep the oldest ones to show as long a credit history as possible.

* Don't turn a blind eye on those reports. Once you've established credit, get in the habit of periodically checking for any fraudulent activity, as well as any reporting mistakes.(BPT)

Chambers Celebrate Juneteenth

Brooklyn, NY - The New American Chamber of Commerce (NACC) Annual International & Multicultural Business Expo 2014 Juneteenth Celebration and Cocktail Reception Awards, held at the Marriott Hotel downtown Brooklyn on June 19, 2014 was a smashing success. NACC in collaboration with the African American International Chamber of Commerce (AAICC), the New York Statewide Coalition of Hispanic Chamber of Commerce (NYSCHCC) and the Hispanic American International Chamber of Commerce (HAICC) welcomed three new chambers of commerce: the Guyana American International Chamber of Commerce (GAICC), the Haitian American International Chamber of Commerce (THAICC), and the Junior Chamber of Commerce (JCC) into its sisterhood. The objective of the broad coalition of Chambers of commerce is to ensure the strengthening of partnership among, and effective networking of minority owned businesses in the New York Diaspora.

Under the theme: "Greater Leaders are Hard Workers" the aim of the coalition is to ensure a decrease in unemployment, by encouraging minority New Yorkers with ties to each of the Chambers mentioned, to start their own businesses and become entrepreneurs who will determine their own destiny. One of the speakers for the Juneteenth Reception, Rev Dennis Dillon, publisher of the NY Christian Times, challenged the large audience gathered to adopt a new mind set about business in order to experience economic changes in the colored communities here in Brooklyn and across New York State. He said that the social agenda that we are accustomed to must be made less important: "I am not suggesting that the social agenda among us as black people, as black America and as a people here in Brooklyn is not important, but, we have got to allow the business agenda to set the tone for the empowerment of our communities and the transformation of our people. We have seen our politicians and the leaders of our communities allow the social agenda to overpower the commerce and the business agenda and so we become emotional about the need for health care. We become emotional about the need for education and the need to have a good justice system in our community failing to recognize that if we do not put in place a full economic infrastructure, we will never be able to establish a full social agenda. So, as Brooklynites, we as a people, got to begin this journey to transform the minds of our people where we allow everything to be built on an economic foundation."

According to Reverend Dillon, there needs to be an awakening of economic realities among the colored communities. He noted that a trip to South Korea in 1999 embolden his desire for economic prosperity as he noticed that there were lit crosses on every businesses in the City of Seoul, an indication that this nation that was once poor economically, placed God in charge of it businesses, thus the need for spiritual dependence and guidance. He stressed that while sociology has its place in society, it must be complimented with economics and politics in order to be effective: "where there is no spiritual foundation, there is no economic power, and where there is no economic power there can be no legitimate political control, and without political control there will always be a sick sociology.

We cannot solve the sociological illnesses that we face in our communities without strong political leadership and we will never have respected political leadership amongst our people, not in the Caribbean, not in Africa, not in New York, not in America, not anywhere in the world until we have economics to protect because in the absence of economics there can be no true politics. That's our dilemma as a people in Africa, the Caribbean, in Detroit, in Harlem, in South Africa and that's our dilemma in Brooklyn. So it is only as we begin to change our mindset and begin to think differently can we truly bring about the change that we need. On this Juneteenth on this important day for blacks in America, I want to challenge us to do some things differently. I want to encourage us to adopt the Koreans formula of doing business here in New York. Go to any Korean store —you will notice that they do not sell any products that are labeled made in China. They only sell products that say made in Korea; it is a very important dynamic. I noticed that Jamaica reported that in 2013, remittances were the largest foreign income earner for the country. Jamaicans living here in New York and elsewhere overseas sent back home some $3 billion to that country…. So we represent power, there is no question about it. The seventh largest airline international carrier to the three ports in New York City happens to be Caribbean Airlines/Air Jamaica we transport more international travelers more than any other international carriers, except three; that is British Airways, Air France and Air Lufthansa. That is a lot of dormant power that needs to be resurrected. So when we talk about this Chamber movement folks I need us to begin to harness our energies together…. The moment we begin to do things apart is when we fail, but when we do things together, is when we create the right kind of transformation and success to our community and bring about the kind of economic redemption that our communities need.”

Support NYC Small Businesses This Saturday, November 30

After Hurricane Sandy, the NYC Department of Small Business Services launched a campaign - "We're Back" - to help raise awareness and drive traffic back to businesses that reopened in the affected areas.

With more than 1,300 businesses registered on www.supportnycsmallbusiness.com that have since reopened since Hurricane Sandy, we are expanding this interactive tool to be available for all small businesses in NYC.

Make it easy for New Yorkers and visitors to find you this Small Business Saturday - add your business to the map today!

ConnectNYC Fiber Access Program

The New York City Economic Development Corporation [NYCEDC] is looking for growing businesses that depend on secure and reliable high-speed internet for downloading and uploading content as part of their daily business operations. These businesses might be eligible for FREE construction of fiber optic cable to their business through the ConnectNYC Fiber Access program.

ConnectNYC provides free construction and installation of a dedicated fiber optic cable directly to your office space. Participating companies must sign a minimum of a one-year contract for internet service at market rates with one of NYCEDC's  participating Internet Service Providers to receive free construction. 

Eligible businesses must have an office location in NYC, have fewer than 500 employees, and explain in their application the potential impact of dedicated fiber optic cable on their business activities. Applications will be accepted on a first come, first serve basis until December 12, 2013 or until the available allocated construction funds are exhausted.

For more information visit http://nycfiberaccess.challengepost.com/. Please feel free to share this information with your colleagues and with your clients.