For the past year, ILSR and Recast City have collaborated on bringing Equitable Lending Leaders, a program to help small business lending programs — supported by the US Economic Development Administration’s Revolving Loan Fund (RLF) program — reach more underserved entrepreneurs and small business owners, particularly owners of color. Now that more than 120 RLFs have participated in Equitable Lending Leaders, we have identified several best practices. In a recent article in Governing, Ilana Preuss, our partner at Recast City, describes the need to close the racial gap in small business development and details those best practices.
“Since the racial reckoning began to spread across America in 2020, state and local governments have issued statements, created commissions, added positions and in some cases even passed laws and ordinances to address inequities. Many of these have focused on disparities in health, housing and policing — understandably so. However, disparities are equally problematic in small-business development, and community development practitioners have an obligation to move beyond commitments and toward action to support a greater diversity of small-business owners.
A major impediment to bridging this gap is the disparity in funding for small businesses. Now more than ever, municipal governments need to step into small-business lending to right the wrongs of the past and help business owners who’ve been excluded from investment and opportunities. It’s a worthy effort that should be strengthened and supported in urban and rural communities alike.
The U.S. Economic Development Administration’s Revolving Loan Fund (RLF) program is an essential tool in supporting this transition. With $950 million currently funded through the RLF program across 500 local, regional and state funds and community development financial institutions — $700 million of that invested since March 2020 — this program and the local leaders distributing these funds serve a key role in meeting the needs of local business owners where traditional banks won’t.”
If you like this post, be sure to sign up for the monthly Hometown Advantage newsletter for our latest reporting and research.