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Despite decades of helping small businesses secure capital, the U.S. Small Business Administration noticed an uptick in targeted borrowers under a program that allows nonprofits closest to the community to underwrite loans.
These Community Advantage loans created during the Obama-Biden administration were picked back up by the Biden-Harris administration and are touted as social equity in action.
Now it’s a building block of the SBA’s loan portfolio.
For example, lending to underserved businesses increased by 11% nationwide between fiscal years 2022 and 2023.
Kirabo Jackson, a member of the council of economic advisers to the Biden-Harris administration, told WHYY News that it’s an intentional focus to flow more money into the hands of Black- and brown-owned businesses.
“That’s been a concerted effort to make sure that is the case,” Jackson said. “There’s also additional money to provide technical assistance to small businesses.”
For years, the SBA would back loans underwritten by banks, credit unions, microlenders or even special entities known as Community Development Financial Institutions — meant to increase lending to women, minorities and veterans.
Now there’s a new type of lender: Community Advantage Small Business Lending Companies, of which there are 142 nationwide.
Since the program began, about 2,000 loans have been approved, totaling $347 million.
A big difference is the median loan size of $150,000, which is much smaller than a typical loan.
