The 2018 survey data continues to show credit availability and financing distinctions among minority-owned firms. For example, McKay said 53 percent of Asian-owned firms are seeking $100,000 or more in financing compared to 31 percent for black-owned firms and 40 percent for Hispanic-owned firms. A larger share of Asian-owned firms are characterized as low credit risk (63 percent) compared to black-owned (36 percent) and Hispanic-owned firms (44 percent) based on self-reported credit scores. In comparison with non-minority owned firms, more minority-owned employer firms apply to large banks for credit, matching a pattern seen in 2017. McKay pointed out the growth in Hispanic-owned and black-owned firms applying to online lenders in 2018. There was an 8 percentage point increase among black-owned firms from 2017 (33 percent to 41 percent) and an 18 percentage point increase among Hispanic-owned firms from 2017 (25 percent to 43 percent). Approval rates at online lenders for black-owned and Hispanic-owned firms are higher than small and large banks. McKay encouraged attendees to check out fedsmallbusiness.org for additional small business resources produced by the Fed, including reports, data as well as information about becoming a Small Business Credit Survey data collection partner.
Peter Dolkart, Community Development outreach manager for Maryland and the District of Columbia, shared the exciting news that the Richmond Fed is launching in the Fifth District the online Investment Connection platform developed by the Federal Reserve Bank of Kansas City. Opening in August, the Richmond Fed will accept Community Reinvestment Act (CRA) proposals from community development organizations in Maryland and the District of Columbia. Dolkart explained that after learning about Investment Connection and then seeing it first hand in action in Denver last summer, he started to pose the same question at gatherings of bankers, community development organizations and stakeholders throughout Maryland and in the District of Columbia — Is there a need to bring this initiative here? The answers usually came in some form of the following questions — How quickly can you start this initiative, and why are you not doing it now?
The application portal opens on August 12 with a rolling review process by Richmond Fed supervisory examination staff for CRA applicability of any submitted proposals. October 11 is the portal’s scheduled closing date, with application review completed by October 25. During Maryland Community Development Week starting November 4, a select number of proposals will be chosen for a live presentation at the Baltimore branch to financial institutions and other funders for potential financial support.
Throughout July, Dolkart will be convening informational and technical workshops to spread the word about this new initiative and answer any application questions before the portal opens. Dolkart explained that he is frequently asked by new community based organizations if the Richmond Fed could provide funding or financial support for their initiatives. While the Richmond Fed cannot provide direct funding, we can provide a forum where invited financial institutions can hear community organizations and service providers make their best case for funding. That is the essence of Investment Connection. The Richmond Fed will be providing community development organizations access to an online platform that gives them the opportunity to secure funding for their CRA eligible activities and services.
