Black Enterprise article by Tamara Holmes

May 8, 2008 -- A Federal Reserve report released this week underscores the increasing difficulty that small business owners are facing in securing loans during the current economic climate. It is a reality that has both African American entrepreneurs and legislators looking for solutions.

"On average, it's difficult for black business owners to get access to capital but when we have downturns in the economy it becomes especially hard," says Reginald Gates, president of the Dallas Black Chamber of Commerce. Without access to capital, entrepreneurs are finding it difficult to expand and even compete for some contracts that require business owners to have a designated amount of funds ready and available to perform the work, Gates says.

The Fed's April 2008 Senior Loan Officer Opinion Survey on Bank Lending Practices, based on responses from 56 banks in the United States and 21 U.S. branches of foreign banks, found that about 55% of domestic banks had tightened lending standards for commercial and industrial loans in the last quarter. Likewise, 50% of survey respondents acknowledged tightening lending standards on loans made to small firms-companies with sales of less than $50 million.

The economic uncertainties being faced by small businesses has members of Congress taking notice. Even before the Fed report, Sen. John F. Kerry (D-Mass.), chairman of the Committee on Small Business and Entrepreneurship, introduced the Small Business Lending Stimulus Act in February. The bill would reduce fees for borrowers and lenders and is designed to entice banks to offer Small Business Administration-backed loans. The bill also would increase funding for microloans-loans up to a maximum of $35,000-which proportionately benefit underserved communities, including women and minorities, more than traditional loan programs, Kerry says.

To read the rest of this article, please click here.