Minority-owned business still struggle to get need loans, both nationally and in Las Vegas

Inside Subprime: April 11, 2018

By Jacob Rogers

Even in Las Vegas, a city known for excess and opulence, African-American owned businesses still have trouble finding loan opportunities in their hometown.

The number of black-owned businesses nationally has increased tremendously from 1972-2012 (194,986 to 2.6 million), according to the U.S. Census Bureau, and while that improvement is amazing, some minority residents of Las Vegas told the Review-Journal they still feel like there is plenty of room for growth. Ken Evans, president of the Urban Chamber of Commerce, told the paper he had talked to many “individuals that either were a startup that could not get the capital or they were trying to grow and scale and could not get the capital they needed.”

The U.S. Small Business Administration gave out just two percent of their 7(a) loans, which provide capital to new and existing businesses. That comes out to just over $2.5 million loaned to African-American owned businesses in Nevada in 2017, down from the previous year. Thankfully, the percentage is higher in the Vegas area with 27 percent of 7(a) loans going to black-owned businesses since 2012, according to the Review-Journal.

The article referenced another report from the Kauffman Foundation, which showed that black-owned business begin smaller when compared to white-owned businesses due to lack of access to the funds needed to grow. It found that six in ten black business owners don’t even try to get financing because they assume the loan will get rejected. This trend holds true among black business owners with exceptional credit scores, and may shed some light on why people of color are more likely to be targeted by predatory payday lenders. When traditional lenders refuse to lend to minorities, they have few places left to turn.

Unfortunately, other studies and data confirm this fear. According to a May 2017 policy brief from the Stanford Institute for Economic Policy Research (SIEPR), black-owned businesses on average have less than half the initial capital investment of white-owned businesses. The same brief states that black-owned startups are three times less likely to have loan requests approved compared to their white counterparts, even when accounting for credit scores and net worth.

Thankfully, there are microlenders operating in Nevada that can help. According to the Review-Journal’s article, the Nevada Business Opportunity Fund gave out $1.6 million in 2017 (about $67K per loan) and has plans to expand their offerings. Accion also loaned $1.6 million, but averaged a lower payout per loan ($10,732). Finally, there is Prestamos CDI, which disbursed $437K in 2017, with an average loan of $43K.

To learn more about the Las Vegas lending industry, check out these related pages and articles from OppLoans:


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