The Black Entrepreneurship Loan Fund started with a vision, but the banks all walked away just days before the launch and the millions of dollars they had supposedly committed never arrived
The Black Entrepreneurship Loan Fund started with a vision: bring government and financial institutions together to provide a pool of money that would help Black business owners, who disproportionately face systemic barriers to accessing capital.
Those who cheer the current system say Black business owners are given a wider choice of loan programs than they would have been offered under a centralized government program. And they argue that, if all the private money that has been promised is spent, there will be a larger total amount of funds available.
Black business owners have long said lack of access to capital is one of their biggest challenges. Last year, in an Abacus Data survey of more than 300 Black entrepreneurs, nearly eight in 10 said it would be difficult or impossible to find even $10,000 to support their companies. Fewer than one in five said they trusted banks to do what is right for them.
What followed were months of talks that, participants said, included frank discussions about the barriers Black entrepreneurs face, and also about the constraints banks in the heavily regulated financial sector felt they were up against in making change. The Globe and Mail is not identifying the sources because they were not authorized to discuss the private negotiations publicly.
The Competition Act contains criminal and civil provisions that prohibit collusion between financial institutions. But the act also spells out some circumstances in which financial institutions can collaborate. For example, one exception allows banks to work together on guaranteed loan programs created by Parliament – such as CEBA. Another exception allows the federal finance minister to endorse a collaboration if it is in service of a financial policy.
When The Globe began to inquire about that claim in late February, the government said the banks were still considered the program’s partners. But it was at this point that the website changed. Mention of the big banks was removed. And the overall budget of the program, once touted as $291-million, was revised down to $160-million, meaning the bank money was no longer being counted.
The microloan programs are modelled after similar programs the two credit unions have run for years, which aim to get money into the hands of people who might be denied traditional bank loans. Cheryl Sutherland, a Toronto entrepreneur who owns an e-commerce stationery business called PleaseNotes, said she applied for a loan shortly after the program launched and still hasn’t received an update on her file, more than nine months later.
“I think they understood what I was trying to do for the community and they believed in it from the beginning,” she said. TD said it would donate $10-million to the BOF over five years. The bank said it is focusing on its Black Customer Experience Strategy, which aims to improve relations with Black clients.In October, RBC launched the RBC Black Entrepreneur Business Loan, which provides up to $250,000
All the federal and bank loans are repayable in 10 years. The federal loans have interest rates of between 6 and 8 per cent. CIBC said its interest rate is the bank’s prime rate plus 1.25 to 3 per cent. RBC and BMO wouldn’t reveal their interest rates.
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