October 23, 2015 (New York) – VEDC and JPMorgan Chase & Co. today announced a new lending program for African American-owned small businesses in New York City, Chicago and Los Angeles. The National African American Small Business Loan Fund will boost economic opportunity for minority-owned businesses in these cities and help them serve low-income communities by providing them with greater access to capital, technical assistance and financial consulting. JPMorgan Chase Foundation has contributed a $3 million grant to help VEDC reach its goal of creating a $30 million loan fund.
Facilitated by VEDC, a California 501(c)3 Community Development Financial Institution (CDFI), this new Fund will provide financing for businesses across all industries. By providing the initial $3 million grant to seed the Fund, JPMorgan Chase is helping VEDC support small businesses that are a critical source of jobs and economic opportunity in their neighborhoods, but may be credit-impaired and unable to qualify for traditional capital. Without access to sustainable financing, these businesses may miss a growth opportunity or risk closing their operations.
African Americans are the fastest growing segment of small business owners
“As a direct small business lender and a leading intermediary of SBA loan programs, VEDC has a 39-year track record of providing business services to small businesses in low-and middle-income communities and especially in communities of color,” said Robert Barragan, President and CEO, VEDC. “Approximately 20 percent of our existing portfolio serves the African American community. With JPMorgan Chase’s seed funding, we look forward to helping more small businesses in our effort to further narrow the lending gap.”
Currently, there are 268,000 African American-owned small businesses in New York, Chicago and Los Angeles – making them among the top cities for African American-owned small businesses. With ownership of approximately 1.9 million, 7 percent of small businesses nationwide, African Americans are the fastest growing segment of small business owners. However, business loans to African American entrepreneurs have yet to rebound since the economic downturn in 2008.
To address this need, the National African American Small Business Loan Fund will provide short and long-term loans. Loan sizes will vary, but the average loan will range from $35,000 to $250,000. The JPMorgan Chase grant will allow the National African American Small Business Loan Fund to provide loans and technical assistance and establish a loan loss reserve. This reserve will allow VEDC to expand its lending criteria to New York, Chicago and Los Angeles small businesses that traditionally did not qualify for a loan.
“African American small business owners have identified flexible capital as a critical resource for growth, but they face a shortage of this kind of support,” said Janis Bowdler, Head of Community Development for Global Philanthropy, JPMorgan Chase. “CDFIs like VEDC provide small businesses with the consulting and financing they need to grow their operations and often serve as a bridge to traditional bank loans down the road. We’re proud to partner with VEDC on this new fund, which will increase access to the capital and assistance that African American entrepreneurs need most.”
Businesses receiving financing will be able to use the capital to expand, finance equipment, address short-term cash flow needs and provide contractor lines of credit. The Fund will also provide small business loan recipients with technical assistance such as networking, marketing, business plan development and financial consulting. Eligible small businesses must be majority-owned by African Americans.
Notable statements of support
“This new lending program will be another critical piece in our ongoing efforts to promote small business development and entrepreneurship in all Chicago communities, and particularly those that have traditionally lacked access to capital,” said Chicago Mayor Rahm Emanuel. “By investing in Chicago’s minority-owned businesses, VEDC and JPMorgan Chase are showing the power of the private sector to help cities tackle some of our biggest challenges.”
“African American-owned small businesses are vital economic engines in Los Angeles, and when they are empowered, our communities have new doors open to them — opportunities that they both need and deserve,” said Los Angeles Mayor Eric Garcetti. “We expect great things from this fund, and thank VEDC and JPMorgan Chase for their commitment to addressing this great need.”
“These small businesses are the heart of our neighborhoods,” said New York City Mayor Bill de Blasio. “They put people to work and create opportunity for families to make their way up the economic ladder. We are excited to partner with JPMorgan Chase and our fellow cities to support and grow African-American small businesses.”
“We know that mission lenders hold the key in providing a sustainable source of capital to minority borrowers and those that have been left out of the economic mainstream,” said Grady Hedgespeth, Director of U.S. Small Business Administration Office of Economic Opportunity.
This new fund complements the recently launched Detroit Minority Business Loan Fund– a $6.5 million loan fund for Detroit’s minority-owned small businesses – announced last month by Detroit Development Fund, JPMorgan Chase and W.K. Kellogg Foundation. Detroit is the fourth largest U.S. city for the number of minority-owned businesses.
Interested small businesses in New York, Chicago or Los Angeles can learn more about eligibility by contacting VEDC at (212) 231-4310.