Two community development organizations are establishing a coronavirus loan program for minority-owned small businesses on Long Island, officials said Tuesday.
The Entrepreneurs of Color COVID-19 Relief Fund will offer microloans of up to $40,000, with an interest rate of 3% and term of 36 months. The fund will initially have between $500,000 and $1 million to lend.
The microloan fund is among the alternatives to the two federal loan programs that ran out of money last week. The Federal Reserve has announced plans to spur banks to make more loans to help small companies survive the coronavirus pandemic and shutdown of nonessential activities.
To be eligible for the microloan program in Nassau and Suffolk counties, a business owner must be black, Hispanic or Native American. Asian business owners are eligible if their firm has annual sales of less than $1 million and fewer than 20 employees. The owner’s citizenship isn’t a criterion for receiving a loan.
“We know entrepreneurs of color who operate laundromats, hair and nail salons, restaurants, bars and day care centers in downtowns have been hit hard by COVID-19,” said Giovana Bracchi, executive director of La Fuerza Community Development Corp. in East Norwich, which advises local minority- and women-owned businesses.
La Fuerza has teamed with a larger community development financial institution, BOC Capital Corp., to establish the microloan fund. BOC Capital is part of the Business Outreach Centers Network, or BOC, which aids small business owners with low incomes in New York City.
“We’re trying to help businesses with five or fewer employees that cannot get a loan somewhere else,” Bracchi said, adding the loans aren’t forgivable and won’t be converted to grants.
Nancy Carin, executive director of BOC Capital, said the microloan fund will offer more than cash to struggling minority entrepreneurs.
She said counselors at BOC and La Fuerza will interview loan applicants to assess their needs, offer advice on running a business and discuss how the loan money will be used. The counselors speak Spanish and English.
“There’s no application on a website,” Carin said. “We want to interact with the business owner, find out about their plans. Appointments will be set up with our counselors who will help the business owner through the streamlined [loan application] process.”
She said loan applicants will need to submit a federal tax return, bank statements, proof of ownership and a statement about how the money would be used. Decisions will be made in about a week.
Banking behemoth JPMorgan Chase & Co. has supported BOC for years. The bank contributed $400,000 to the microloan fund for use as a loan-loss reserve and for setup expenses.
“We hope our funding of the Entrepreneurs of Color COVID-19 Relief Fund will help BOC and La Fuerza to attract capital” for more loans, said Jeanique Druses, vice president for global philanthropy at Chase.
More information is available by sending an email to EOCF@bocnet.org
Separately, the Fed is finalizing its Main Street Lending Program, which encourages private banks to increase their lending to small- and mid-size businesses by purchasing up to $600 billion in loans. Eligible loans are for four years and must go to businesses with up to 10,000 employees or annual revenue of less than $2.5 billion.
Fed chair Jerome Powell said in an April 9 statement that the central bank is committed to providing “as much relief and stability as we can during this period of constrained economic activity, and our actions today will help ensure that the eventual recovery is as vigorous as possible."
New York's piece of the federal loan pie
The U.S. Small Business Administration on Tuesday released new figures on how many loans were secured by businesses in New York State before the money in two federal loan programs ran out last week:
Paycheck Protection Program -- Bank loans of up to $10 million, backed by $349 billion in federal loan guarantees
81,075 bank loans approved, totaling $20 billion
Average loan size: $250,949
Economic Injury Disaster Loan advances -- Forgivable loan advance up to $10,000, funded by $10 billion from the U.S. Treasury Department
51,428 loan advances, totaling $211 million
Average size: $4,106
Economic Injury Disaster Loans -- Loans of up to $2 million, funded by $7 billion from the U.S. Treasury Department
1,126 loans approved, totaling $242 million
Average loan size: $215,298
SOURCE: U.S. Small Business Administration