When she needed capital to expand her business, Ernisha Randolph was just one of countless African Americans to encounter roadblocks despite having no history of financial trouble.
About seven years ago, her catering company, Juanita’s Kitchen, had secured a big government contract that guaranteed revenues for three years. To finance the expansion, she turned to banking giant Wells Fargo.
“I asked them for $50,000 and when they denied it, I went down to $25,000,” she recalled in an interview. “I did not get that, either.”
Randolph turned to OneUnited, one of the leading African-American owned banks in the US that have supported minority-owned businesses over the decades.
With credit from OneUnited, Randolph transformed her Miami company into today’s mini-food empire.
The Sweet Butter Hospitality Group includes the restaurant Shuckin & Jivin that now appears better positioned than many other restaurants and small businesses to survive the blow from the coronavirus.
“I am very very grateful for black-owned banks,” Randolph said. “For so long we have been denied loans.”
As the political debate in the US shifts following mass protests in the wake of the killing of George Floyd at the hands of police, the focus is turning to systemic barriers to opportunity for African Americans, including in the banking system.
– Larger mission –
Banks led or owned by African Americans have long proven a lifeline for America’s black businesses.
The financial groups are based in the heart of urban centers and view banking as part of a larger activist mission that supports the black community by ensuring minorities can access needed capital.
“If you go to another bank, you might see someone talking about a boat loan,” said Teri Williams, president of OneUnited Bank, who said her company’s programs are more tailored to the black community.
This includes “early pay” that allows consumers to get paid two days early.
“We support Black Lives Matter, we support take a knee, so for us it’s a mission to support our community and that’s the service that we provide,” she said.
Carver Federal Savings Bank, which has branches in working class areas in Manhattan, Queens and Brooklyn, reinvests 80 precent of its deposits back in the community, said Chief Executive Michael Pugh.
“It’s an opportunity to help ensure that in neighborhood by neighborhood in our great state,” people have access to finance, he said. “If we didn’t do this work who would do it?”
The process of opening a savings account is similar to that at traditional banks, but the African American lending companies also offer some other services aimed at their cliental, such as business coaching and financial training workshops.
Industrial Bank requires a business plan of small businesses and scrutinizes financial statements and doesn’t always provide financing, said Chief Executive Doyle Mitchell.
“If we can’t make a loan we will tell you what we believe you need to work on to better prepare for,” Mitchell said, adding that the bank aims to be competitive on interest rates for mortgages, not the lowest but “not the highest” either.
– Grew in 60s –
Many of the banks that today serve the African American community emerged after the Great Depression and grew further in the 1950 and 1960s in parallel with the US Civil Rights Movement. Back then, blacks had few other options to obtain credit.
“There was a need to have a black bank because that was the only place that you could borrow money to buy a car, or to start a business or expand a business or buy a house; and if you didn’t have a black bank at the time you couldn’t borrow money to do any of those things,” said Mitchell, whose grandfather helped cofound Industrial Bank in 1934 in Washington DC.
Eighty-six years later, the need is as strong as ever because many black consumers face difficulties at traditional banks following tougher lending standards imposed after the subprime housing crash that led to the 2008 global financial crisis.
Other lenders impose harsh financial conditions on mortgages if a consumer has poor credit, “almost like the black tax,” said Donnell Williams, who is a vice president with the National Association of Real Estate Brokers.
“We all know how important it is for a black person to own a home,” Williams said, adding that the mortgage can serve as collateral for other financing to start a business or send a child to college.
A 2018 report by the Center for investigative Journalism found widespread financial “red lining” in the US banking industry, with people of color more likely to be turned down than white counterparts for home loans in 61 American cities.
JPMorgan Chase, Bank of America and Wells Fargo have all in recent years paid millions of dollars in fines following lending discrimination probes.