Small Business

SBA Loans to NJ Black-Owned Small Businesses up 154 Percent

US Small Business Administration (SBA) loan approvals and dollar volume to New Jersey black-owned small businesses increased a whopping 154 percent in loan approvals and a healthy 40 percent increase in dollars, during the first four months of the agency’s fiscal year 2018, the period of Oct. 1, 2017 thru Jan. 31, 2018 compared to the same time period during fiscal year 2017.

According to SBA New Jersey District Director Al Titone, SBA loan approvals to black-owned businesses for New Jersey totaled 33 loans for $5.2 million compared to 2017 totals of 13 loans for $3.7 million.

“While this is encouraging news for the New Jersey African American community,” said Titone, “a recent study prepared by Alicia Robb, Ph.D of SBA’s Office of Advocacy shed light on the ongoing financing challenges facing minority entrepreneurs.  Using data from the U.S. Census Bureau’s 2014 Annual Survey of Entrepreneurs (ASE), the study shows that nearly 60 percent of Black or African American business owners indicated they chose not to apply for financing despite needing the funds because they did not think their business would be approved by the lender, compared to 47 percent of White business owners and 44 percent of Asian business owners who responded to the same question.”

“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,” added Titone.  “We’ll look to increase our participation with lenders and community economic development groups to provide more education and programs on credit repair and financial literacy so that loan approvals to the African American small business community can continue to improve.

According to Titone, the SBA New Jersey district office approved a total of 85 loans for $17.8 million during fiscal year 2017.  “In 2018, we are on pace to do 132 loans for $21 million for African American small business owners around the state,” said Titone.  “Over the first four months of this year, SBA loans helped to create 91 new jobs and retain another 89 jobs for black-owned businesses.  Some of these 33 loans helped to fund child care centers, a medical laboratory, restaurants, car washes and residential contractors.”

Titone noted that 13 of New Jersey’s 21 counties had at least one loan approved to a black-owned business.  Essex and Union Counties led the way with six loan approvals for $1.3 million and $763,000 respectively.  Monmouth County followed with four loans for $254,000.  Somerset and Middlesex Counties approved three loans for $175,000 and $92,200 respectively, while Hudson and Mercer Counties had two approvals for $512,000 and $120,000 separately.

On the lending side, TD Bank approved the most SBA loans to New Jersey black-owned businesses with 12 loans for $580,200.  Independence Bank followed with five loans for $360,000.

While the average size loan for a black-owned business was $160,000, the largest loan approved was for $980,000 by United Bank of Philadelphia to Advanced Computer Solutions Group of Mount Laurel.  In comparison, the overall average SBA loan in New Jersey during this timeframe was for $403,000.

“The trend toward smaller loans continues,” said Titone. “Between fiscal year 2014 and 2017, the SBA has not charged any fees for loans under $150,000.  In order to continue the no-fee structure this year, the SBA lowered the loan amount for loans under $125,000.  Small business owners throughout New Jersey, but especially in underserved communities, are benefitting from this incentive.  Setting fees at zero effectively makes these loans cheaper for borrowers, encourages lending to small businesses that face the most constraints on credit access and creates lending opportunities important for underserved communities.  Clearly, we are seeing positive results in the recent surge in loan approvals to African American businesses in parts of the state, but we will strive to do even more to assist these businesses in preparing, and getting, conventional loans for their businesses.”

“Part of that effort will come through our SBA Lender Match program, a free online referral tool that connects small businesses with participating SBA-approved lenders,” said Titone.  “The other part will come from educational programs and resources available through the SBA.

“Three years ago, the SBA partnered with the National Association of Government Guaranteed Lenders (NAGGL) to provide underserved communities with a training module called Business Smart,” said Titone. “We have to make more community economic development groups aware of this program so they can take these modules and begin teaching entrepreneurs the basics of starting a business and how to qualify for SBA loan programs.  It is free, can be easily downloaded, and is one of the ways that the SBA can begin to help more African Americans to start or expand a small business in New Jersey.”

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