Sacramento Business Journal: Disparity In Bank Lending To Black Business Owners

The Sacramento Business Journal released a special issue this week on the decline in bank lending to Black-owned businesses over the past decade.

An analysis in collaboration with the Portland Business Journal found that there has been an 84% national decline in lending to Black business owners since 2007 under the Small Business Administration’s small business lending program.

They have found that while banks generally don’t collect demographic or race data on their borrowers outside the SBA program, a separate analysis conducted using Census data showed that majority-Black census tracts nationally received $157.58 per capita in business loans, versus majority-white tracts receiving $304.59 per capita locally in Sacramento.

When they compared the 10 largest majority-white census tracts to the 10 largest majority person-of-color tracts, they found that in white neighborhoods like Galt, Antelope, and North Highlands, business owners received $254.67 vs. $153.72 in people-of-color neighborhoods like parts of Elk Grove, Meadowview and North Sacramento.

Banks responded by saying that creditworthy customers can get loans. They also take issue with the data collection starting in 2007, which was the height of easy lending before the Great Recession hit. Critics say that misses the point.

Lending disparities may contribute to economic inequality, which may also drag down the entire economy.

The Sacramento Business Journal spoke with five local Black business-owners and found four had issues when trying to secure capital. The one who did not, Ron Kelley, said while he had no problems raising capital, he lives in California because of the discriminatory lending his grandparents experienced on their farm in Oklahoma.

In 2018, the Brookings Institute ranked the 100 largest U.S. metro areas for inclusiveness, and Sacramento came in 84th place.