After opening two Buffalo Boss organic chicken wing restaurants in New York City to great acclaim, Jamar White wanted to give New Jersey a taste of his spicy sauce. For his dreams to come to fruition, he turned to the U.S. Small Business Association for a financial booster: a $387,000 loan.
“It was a long and daunting flurry of paperwork,” White said. “Applying for an SBA loan takes anywhere from three to six months of documentation, waiting, approvals, back and forth, more documentation. … But once you finally get it, it’s a real godsend being able to get access to capital as a small business.”
According to the SBA, there were 20 more loan approvals to New Jersey black-owned small businesses — 33 total — during the first four months of the agency’s 2018 fiscal year, as compared to the same time period a year earlier.
Aggregate lending to those same businesses was up 40 percent to $5.2 million.
But a recent study by SBA’s Office of Advocacy shows nearly 60 percent of black business owners indicated they chose not to apply for financing because they did not think their business would be approved.
“This tells me that, despite our advances, the SBA New Jersey District Office needs to continue its outreach to lenders and borrowers alike to make sure they understand the possible opportunities they may have available to them,” said SBA New Jersey District Director Al Titone in a statement.
White, who is African-American, spoke to NJBIZ about how he believes the black experience plays a role in the perception that SBA loans won’t be available to them.
“No one has given us any formal training on business acumen, proper business plan, projections and these things,” he said. “So in our minds … we ‘know’ we’re not going to get [the loan]. We’d just rather not even go out for it because getting the proper knowledge as far as how to do these things has alluded us for generations.
“It’s not like we had generations before us who went into business and got loans from banks and dealt with institutional lending,” he added. “Previous generations, it was far harder for them to even apply for it. We’re probably the first generation to really [have the opportunity to] understand the process and feel comfortable with actually getting financing. In my mother and my grandmother’s generations, there was literally institutional racism where the banks would not issue black people money. I think that’s what fuels the case of us not even applying for financing.
In the most recent fiscal quarter, 13 out of New Jersey’s 21 counties had at least one loan approved to a black-owned business.
Essex County had the highest amount of approvals with six loans totaling $1.3 million. Hudson County, where White’s wing business is opening this spring, had two loan approvals totaling $512,000 in the same quarter.
Alicia Robb, the researcher who headed the SBA Office of Advocacy study, detailed why well-qualified minority borrowers not applying for needed credit suggests that overcoming racial differences in financing is not just a matter of expanding the supply of credit available.
“Understanding the drivers of these racial differences is going to require delving into perceptions on both sides of the financing table, as well as changes in financial planning and how credit histories can be built over time,” Robb said. “However, it is clear that something needs to be fixed — for example, improving credit scores, raising wealth levels and increasing banking relationships for blacks and Hispanics. These improvements are not only needed for fairness, but for our economy to operate at full capacity.”
Titone said the SBA will look to increase its participation with lenders as well as community economic development groups to deliver more educational programs on credit repair and financial literacy, with the end goal being the continual improvement of loan approvals to aspiring African-American small-business owners.
“What I would tell [prospective loan applicants] is to not to be intimidated,” White said. “Ask for what you need and ask for help on how to package it as well — that’s what I would tell aspiring business owners of color. That money is available for us. They are giving it to us — minority businesses, businesses of color — so go out there and approach your SBA.”