SBA Changes Are Hurting Women and Minorities in Business
The National Organization of Women (NOW) has issued a comprehensive Feminist Action Agenda for 2009. While many of their positions are controversial and call for more government regulation of even the smallest of businesses, among the proposed action items NOW addresses two important areas lacking at the Small Business Administration (SBA):- ”Increase funding for the Women's Office at the Small Business Administration and strengthen the women's procurement program so goals can be more easily achieved;
- Increase the proportion of federal contracts awarded to women-owned businesses from 3.4 to 10 percent; and
- Increase the Small Business Contracting Goal and expand use of subcontractors.”
But NOW and other women’s activist groups need to address something even more pressing; the changes in Community Express loans that are hurting women and minorities in business.
Changes in SBA Community Express Loans Are Hurting Women in Business
The current credit crunch in the U.S. has hurt businesses across the nation, but changes in SBA loan policies are making it even harder for women and minority small business owners. When the Community Express loan program was established in 1999, Congress set limits on how many loans could be given out but loans are now being restricted by the SBA far more than even Congress originally mandated.In the absence of other credit options, more business owners began applying for the once easy-to-get Community Express loans which prompted the SBA (in April 2009) to advise lenders they would have to reduce the number of Community Express loans they approved each month.
Because of this congressional “cap” on certain loans in the SBA's flagship lending program, what has followed is not only a sharp decrease in the number of loans being given to small businesses, but a relaxation on eligible populations that has increased the number of businesses eligible for the dwindling supply of loans making it even more difficult to get cash.
For example, Community Express loans were originally intended to help minority-, women- and veteran-owned small businesses in low- and middle-income areas. This helped businesses to grow in economically-challenged areas and encouraged minorities and women to start new businesses in their own communities.
But now Community Express loans are aimed at serving all small businesses applying for loans that are less than $25,000, as well as businesses who want more than $25,000 but whose businesses are in “historically underutilized” business zones, or meet any other requirement under the intensely controversial “Community Reinvestment Act.”
Not only are fewer loans being made, but loan requests are also being reduced. For example, a business owner may apply for a $25,000 loan but be told that they can only get $5,000 due to SBA restrictions and Congressional caps.
These recent changes have undoubtedly already lead to fewer women and minorities successfully obtaining Community Express loans. This is not only due to changing the demographics of qualified loan applicants to include all business owners, making the anti-discriminatory nature of the program obsolete. In other words, the program once based on serving business owners and populations who were being underserved, now favors geography over gender and need.
