As the country continues to mend from the widespread impacts of the coronavirus, helping minority-owned small businesses will be key to achieving a full economic recovery. It is well documented that many Black, Hispanic-Latino and other vulnerable communities are experiencing delay in getting back to business-as-normal, a trend that minority communities, business owners and entrepreneurs have long faced, particularly where access to wealth-building tools are concerned. For example, according to Bank of America’s 2021 Black Business Owner Spotlight, 82% of respondents noted they have had to work harder to achieve the same level of success as non-black business owners, and 56% reported that challenges in accessing capital limited their business growth.
Public programs, including the Paycheck Protection Program (PPP), relieved some of that distress by providing cash to businesses to cover payroll and other expenses. Additionally, nonprofit organizations have been offering economic and professional assistance to struggling business owners. However, this support is short term and longer term solutions are needed. Through a variety of means, the private sector can help to provide dependable, sustainable capital to community businesses in need.
A network of support
Bank of America has long focused on supporting the needs of under-represented small business owners and entrepreneurs, working with an established network of community partners such as – Community Development Financial Institutions (CDFIs), and most recently with Minority Depository Institutions (MDIs), as well as minority focused funds that support entrepreneurs.
- CDFIs are typically non-profit loan funds that provide capital, mentoring and financial advice supporting small businesses, affordable housing, fresh food supermarkets, healthcare centers and nonprofit organizations operating in lower income communities which do not qualify through traditional lenders. CDFI banks operate in a similar manner to CDFIs, but take deposits.
- MDIs are typically depository institutions with either (i) more than 50% minority ownership or (ii) a majority of the board of directors is minority and the community that the institution serves is predominantly minority.
- Minority focused funds provide capital to Black, Hispanic-Latino, Asian, Native American, women and other minority entrepreneurs.
The bank doubled down on this support in 2020 with its $1.25 billion racial equality and economic opportunity commitment, dedicating $200 million in investments to minority-focused funds and $50 million to MDIs and CDFI banks. In less than a year, Bank of America surpassed the $200 million goal, committing more than $300 million to more than 100 investment funds across the U.S. to date and subsequently increased its commitment to minority focused funds to $350 million. This is in addition to deploying $36 million in investments to 20 MDIs and CDFI banks to date.
These equity investments are in addition to approximately $100 million in deposits from Bank of America in MDIs. The company is also the largest private investor in CDFIs in the United States, currently with more than $2 billion in loans and investments in more than 250 CDFIs in all 50 states.
Where support is needed
One such MDI and CDFI bank that Bank of America supports is Ponce Bank. Founded in early 1960, Ponce Bank was started by community leaders in the South Bronx looking to provide financial services to the area’s mostly Puerto Rican population – an immigrant community largely underserved by mainstream banks. More than 60 years later, the institution has grown to 13 branches and 6 mortgage offices still serving prominently immigrant neighborhoods. As historical inequalities and biases continue to affect the communities they serve – particularly during the pandemic – Ponce has worked to be an engine for economic empowerment, helping to reduce the health and wealth gap that exists in the communities they serve.
“MDIs are critical for communities of color who historically have been – and continue to be –underserved by larger, more mainstream banks,” said Carlos Naudon, President of Ponce Bank. “The confluence of events over the past year have highlighted the importance of institutions such as ours. Over this year we have supported everyone from the restaurant owner down the street to one of the largest builders of affordable housing in NYC. We are committed to continue to grow and support the needs of the communities we serve because those needs continue to exist, and we understand that because we live it.”
Bank of America’s $1.25 billion racial equality and economic opportunity commitment is focused on areas where historical, long-term gaps have existed, including housing, workforce development, healthcare and small business assistance.
Learn how a mix of philanthropic and business opportunities, with the majority of funds being delivered at the local level, is helping to address historical barriers where they exist, drive more opportunity and sustain progress.