Almeida bill would rectify racial inequities in state-administered small business loans
STATE HOUSE – The federal Small Business Jobs Act of 2010 has resulted in $13.1 million in federal funds available to Rhode Island to help small businesses grow and put more unemployed Rhode Islanders to work.
But of the $7.3 million in federal funding actually lent to small businesses in Rhode Island since that year, only $17,645 – just 0.2 percent – has been lent to a single black-owned business. Overall, just 6 percent of the total went to any minority-owned companies.
Rep. Joseph S. Almeida has introduced legislation requiring the Rhode Island Commerce Corporation to lend money in a way that better reflects the demographics of Rhode Island’s population.
“This money was meant to put unemployed people back to work. But even though minorities have a higher unemployment rate than the general population, minority-owned businesses are not getting anywhere near a fair share of the money,” said Representative Almeida (D-Dist. 12, Providence). “This money is supposed to be used to get people working again, and minorities need that help.”
The legislation (2014-H 8007), which is scheduled for a hearing before the House Finance Committee tomorrow at the rise of the House session (around 4:30 p.m.) in Room 35 on the basement level of the State House, would establish the Rhode Island Small Business Minority Lending Program and includes a micro business lending component and a collateral support component. The Small Business Minority Lending Program would be a means to ensure that minorities are proportionately represented among business-owners who receive loans from federal small business lending programs in Rhode Island.
Under the bill, the state would be required to allocate the remaining and future funding available for federally funded small business loan programs to minorities in proportions at least equal to their representation in the population under 2012 census statistics. That means 23.79 percent of the total funding must be lent to minority-owned businesses. More specifically, 7.3 percent of the total would go to black-owned businesses, 3.2 percent to Asian-American owned businesses, 13.2 percent to Hispanic- or Latino-owned businesses and .9 percent would go to American Indian- or Alaskan native-owned businesses.
To help achieve those goals, the legislation establishes the micro business lending program, to be administered by the Rhode Island Commerce Corporation, which would provide small loans of up to $50,000, as well as business development support, to help existing businesses grow, and to help startups succeed. To qualify, a business must have annual gross receipts of $70,000 or less and zero to four employees, other than the owner.
As another means to achieve proportionate distribution of the loans, the legislation also creates a collateral support program that would set aside some of the funding to serve as collateral for micro businesses that are also minority business enterprises, allowing them to add up to $15,000 to their total collateral to secure up to 30 percent of a commercial loan through a lender. The program is meant to assist in expansion plans for minority-owned businesses that may have little collateral, or are “upside down” on mortgages due to reductions in property values in recent years.
According to the Rhode Island Black Business Association, which helped develop the bill, lack of access to capital prevents Rhode Island’s black and minority firms from growing and expanding sufficiently to significantly impact employment and economic growth in the state. Only 11.4 percent of Rhode Island businesses have minority ownership.
Supporting their expansion however, could help address high unemployment among minorities, since studies have shown minority-owned businesses are more likely than non-minority owned businesses to hire minority employees. While the unemployment rate among whites in Rhode Island was 8.7 percent in 2013, it was 16 percent for black Rhode Islanders and 20.8 percent among Latinos.
The legislation is cosponsored by Rep. Anastasia P. Williams (D-Dist. 9, Providence), Rep. Larry Valencia (D-Dist. 39, Richmond, Hopkinton, Exeter), Rep. Marvin L. Abney (D-Dist. 73, Newport, Middletown) and Rep. Raymond A. Hull (D-Dist. 6, Providence, North Providence).
For more information, contact:
Meredyth R. Whitty, Publicist
State House Room 20
Providence, RI 02903