Despite the fact that African-Americans are the fastest growing segment of the nation’s small business owners, business loans to African-American entrepreneurs have yet to rebound since the economic downturn in 2008.

Small Business Administration (SBA) loans for example, haven’t kept pace, with loans to African-Americans declining nearly 50 percent even as overall SBA loan volume rose nearly 25 percent. Today, only 2 percent of SBA 7(a) loan approvals are for African-Americans despite the fact that approximately 7 percent of the nation’s small businesses are owned by African-Americans. This presents a serious problem given that African-Americans were hit disproportionately hard by the economic meltdown – losing almost 50 percent of their wealth as compared to 26 percent of their white counterparts and pushing efforts to recover further back as lenders tightened eligibility requirements.

Difficulty accessing business capital is a problem that reaches far beyond dashing an individual African-American entrepreneur’s dream. Small businesses are vital to a healthy national economy. Nearly 2 million of the 3 million private sector jobs created last year were generated by small businesses. The health of African-American small businesses also play an important role in African-American communities. Independent shops, restaurants, and other businesses provide services that are often in scarce supply in African-American communities. In addition, jobs created by African-American small businesses are frequently filled by people from the neighborhood. This provides employment opportunities in communities that may be struggling with unemployment or underemployment.

To help African-American entrepreneurs, VEDC and JPMorgan Chase & Co. recently launched the National African American Small Business Loan Fund. The lending program, which targets African American-owned small businesses in New York City, Chicago, and Los Angeles, will provide with greater access to capital, technical assistance, and financial consulting. The JPMorgan Chase Foundation’s $3 million grant will help VEDC reach its goal of creating a $30 million loan fund.

The dedicated loan fund is designed to provide African-American entrepreneurs with affordable small business between $35,000 and $250,000. Rather than using rigid credit guidelines, flexible eligibility criteria addresses the unique credit, collateral, and cash flow situation of an individual borrower. Technical assistance is another important component of the program. African-American small business owners receive guidance while applying for loans, along with finance, accounting technology, marketing, procurement, and other business assistance after the loan has been granted. This approach increases the likelihood of success for businesses and reduces the risk of loan defaults for lenders.

The loan program is an important step toward increasing access to financing for African-American entrepreneurs. By providing specialized resources tailored to meet the specific needs of African-Americans small businesses, we can narrow the lending gap and widen economic opportunities.