Big Six banks’ loan programs for Black entrepreneurs off to slow start

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The Black entrepreneur lending programs from Canada’s Big Six banks have been off to a slow start, with the institutions indicating they have approved few loans this year.

In the wake of the killing of George Floyd – a Black man murdered by a white police officer in Minnesota in 2020 – the banks, the federal government and Black business organizations held talks for months about how to increase funding to Black entrepreneurs, who disproportionately face systemic barriers to accessing capital. All parties nearly came together to form a new national lending initiative, but by the summer of 2021, the banks had walked away to design and run their own programs.

A new non-profit, the Federation of African Canadian Economics (FACE), now administers the Black Entrepreneurship Loan Fund, the federal program.

Four banks – Bank of Montreal BMO-T in October, Canadian Imperial Bank of Commerce CM-T in January, Royal Bank of Canada RY-T in February and Bank of Nova Scotia BNS-T in June – have launched Black entrepreneur loan programs similar to the federal one. Toronto-Dominion Bank is set to launch its own in the coming months.

However, the banks have received criticism from some Black entrepreneurs about a lack of transparency around how these loans differ from the banks’ other lending products and whether any loans have actually been handed out under their programs.

The Globe and Mail reached out to each bank about the status of their programs. For the most part, the banks provided very little detail.

BMO indicated it had received nearly 100 applications from Black entrepreneurs and approved several, though it declined to specify how many. It also declined to provide interviews with anyone at the bank or any clients.

“We’ve received inquiries from interested entrepreneurs across the country and the approved loans represent a wide range of businesses representing a broad cross-section of the economy including retail, services and transportation and logistics sectors,” BMO spokesperson Kate Simandl said in an e-mail.

CIBC would not give figures about its program. However, the bank and the Black Opportunity Fund – a non-profit that is collaborating with CIBC and other institutions on how they work with Black clients – did connect The Globe with four Black entrepreneurs who had either received a loan or were in the final stages of the application process.

Lisa-Ann Geddes, who owns the Vegan Delights restaurant in Whitby, Ont., is one of those entrepreneurs. She ran a bistro focused on plant-based takeout and catering in Northern Ontario for seven years before moving south in March.

She said she initially applied with another bank to get a loan to open her new location, but grew frustrated with their process. She then applied to CIBC’s program for Black entrepreneurs in July. She said the experience was completely different and her loan officer was very responsive to her questions. She said she received a loan from the bank by the end of July and opened her restaurant last week.

“They have been tremendously helpful,” Ms. Geddes said.

Austin Walters, senior director of inclusive client strategy at CIBC and lead on their Black entrepreneur lending program, described the program’s debut in January as a soft launch, with a full launch slated for this month.

CIBC’s program offers between 10-year loans of between $5,000 and $250,000 for equipment and leasehold improvements, and two-year loans of between $5,000 and $100,000 for working capital.

Mr. Walters said the bank has been learning and adjusting its program over the past eight months in response to feedback from applicants. For example, he said, the bank is looking at extending the length of its working-capital loan and is allowing applicants to pay only the interest for the first year.

He said CIBC has also built a team of more than 50 people who work exclusively with Black clients.

RBC declined to give many details of its lending program, but said it had “engaged” with thousands of Black clients and entrepreneurs this year.

Greg Grice, executive vice-president of business financial services at RBC, said in a statement that the bank is focused right now on providing business training and educational workshops to Black entrepreneurs on topics such as managing cash flow.

Scotiabank said it was too early to comment on its program, which launched this summer.

TD, which unveiled a strategy last year to improve customer service for Black clients, said it would have more to announce in the coming months.

National Bank announced earlier this year it is working on a $5-million investment fund in partnership with the Black Opportunity Fund (BOF), but had no plans for a lending program. A bank spokesperson said Tuesday there were no updates to this plan. Post publication on Wednesday, the bank spokesman said they have plans to do a loan program for Black entrepreneurs, but no specific date for when it would launch.

Many of the banks are working on their initiatives with the BOF, an organization set up in 2020 by a group of Black Bay Street executives.

Craig Wellington, executive director of the BOF, said his group’s goal is to identify the barriers that are preventing Black business owners from getting funding and help them overcome those problems.

Progress on the banks’ programs may appear to be slow, he said, but that is only because of the time required to work with entrepreneurs to make sure their businesses are at a stage where they can make the best use of the financing.

He said many business owners have applied for funding before they were ready, and that was part of the reason for the high rejection rate for the government-funded Black Entrepreneurship Loan Fund.

He said he is also seeing banks make changes such as, in some instances, waiving the personal guarantees required by borrowers. That is one barrier more statistically likely to affect Black business owners, because of a lower rate of home ownership.

“We’re confident in saying that the experience with banks for lending two years ago is very different to what it is today,” Mr. Wellington said.

But many Black entrepreneurs who have spoken to The Globe say the criteria for loans under these programs is not always clear – especially not what makes them different from the bank’s regular lending programs.

Grantley Othneil Adams, president of Lyve Lending Group, an Ottawa-based fintech that helps businesses find unsecured loans, said it is disappointing to see how little information the banks would share about the details and results of their Black entrepreneur loan programs.

“It’s about trust,” he said. “I want to see transparency. I want to see numbers, in terms of how many applications came in and what percentage of them are approved and what percentage of them are declined. … I’m not sure why these things are hidden.”

Editor’s note: A National Bank spokesman contacted The Globe and Mail post publication to say that the bank is planning a loan program for Black entrepreneurs, though there is no date set for the launch.

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