Global Business Lending, a Fort Lauderdale-based company that provides short term business loans for small to medium-sized businesses in the United States teamed up with U.S. Business Lending in Melbourne, Fla. to launch a special minority loan program available to all U.S. minority-owned businesses on January 1.

Under this first-year loan initiative, the company has allocated $100 million per month to fund businesses that are owned by women, disabled persons, veterans and/or people of color. Each business can apply for up to $250,000.

This new program comes at a time when it has become increasingly hard for these businesses to obtain credit lines or traditional bank loans because they are considered “D” paper to most lenders.

“Most business owners who do not succeed today fail because they can’t obtain the capital they so desperately need,” said Dean Sealey, vice president of U.S. Business Lending. “I have been trying to change that ever since I entered this industry many years ago. Most business owners today have no idea that we even exist, and that we have a solution for many of them.”

The funds that the company provides are technically not loans; the correct term is a merchant cash advance, which is a short-term advance of funds against a business’s future receivables. To qualify, businesses do not need to prove good credit, but instead must prove that they have a monthly bank balance of $6,000, have been in business for 3 months and are not in an open bankruptcy.

If a business defaults, because this money is unsecured, its collateral is not in jeopardy but the debt goes to collections and the lender submits a Uniform Commercial Code filing against their business.

Global Business Lending says the default rate is very low, comparable to the default rate on a traditional bank loan.

The lender doesn't get equity stake but it does withdraw directly from the business's merchant account a percentage of daily receivables. Once the cash advance is paid back, the lender no longer has any hold on the business. These are short-term loans, generally, anywhere from 3-12 months. Some businesses choose to never renew a cash advance, but some do. Global Business Lending says the "average renewal rate is two to three times in one year.”

According to Entrepreneur.com, this 15-year-old industry is “booming, mainly because bank lending criteria have become so tight since the Great Recession that very few small businesses are able to qualify for bank loans.”

“Our people are placed in an environment that the risk of losing is so high,” said Brian Johnson, CEO of Broward County Minority Builders Coalition Inc. “That’s why we need lenders who understand that environment.”

Minority businesses make up almost 15 percent of the 28 million small businesses in the United States, says CNBC.com.

In 2007, Asians owned 1.6 million businesses, Blacks owned 1.9 million, Hispanics owned 2.3 million, and Native Americans/Pacific Islanders owned 0.3 million, according to the most recent data from the Small Business Administration.

The three states with the largest number of minority-owned firms that year were California, Texas and Florida. Florida had 680,069 minority-owned firms, which made up 11.8 percent of all minority-owned firms in the country.

However, Christine Kymn, an economist at the Small Business Administration Office of Advocacy, told CNBC that they are “disproportionately denied access to capital when they apply for it” and that Hispanics and Blacks are the minorities most affected.

Dart Reed, funding disbursement manager at Global Business Lending, said he has worked closely with several minority applicants from across the country but notes that construction firms tend to be the most-hard up for upfront cash.

“There have been many minority contractors that I have worked with in the past who can’t grow their business because they just don’t have access to capital to take on additional work or larger contracts,” said Reed. “Generally, I’ll help them secure funding to cover the payroll or purchase of materials necessary to complete their projects.”

For Johnson, this is a welcome change as his organization’s mission is to ensure highly skilled minorities and women are fairly represented within the local, state and global construction industry.

“Many contractors work on projects that they don’t get paid for until the project is completed. So they’re waiting sometimes 45, 60 or 180 days until you get paid,” he said. “Unlike a retail store that has one-time start-up costs, contractors have continual start-up costs so their companies are more cash-demanding.”

It is common for a contractor, in order to win a bid on a $500,000 job, to need upfront money for materials and labor; otherwise, it is likely that he or she won’t get the job.

Johnson says that even when a minority contractor receives sub-contract work, “the prime contractor says ‘we’ll let them work, but we’ll kill them slowly.’”

In many cases, he says, the prime contractor may stunt the minority business’s growth by offering slow pay or not approving estimate change orders.

“With our help, these minority business owners can begin to stand on their own two feet,” said Reed.

Global Business Lending, 1770 NW 64th St., No. 350, in Fort Lauderdale, can be reached at www.globalbusinesslending.com or at 954-239-9787.

Source: 

http://miamitimesonline.com/news/2016/jan/13/2016-minority-loan-program-launched-jan-1/