From the St. Louis Post-Dispatch.
By Annika Merrilees , Janelle O’Dea
ST. LOUIS — Over the course of three decades, lenders have awarded fewer and fewer loans from a major federal program to north St. Louis businesses, according to a Post-Dispatch data analysis.
The review — which looked at loans distributed as part of the U.S. Small Business Administration 7(a) program — showed that less than a fifth of recipients had addresses located north of Delmar Boulevard.
Businesses across the region are now struggling with the coronavirus shutdown. Congress has earmarked billions of dollars as a lifeline to keep employees paid and businesses afloat until the economy reopens. But some worry now that, if history is a guide, north St. Louis businesses won’t see the new cash.
“A lot of the banks are dealing with clients who already have relationships with them,” said Erica Henderson, who is heading the emergency micro-lending fund at the St. Louis Economic Development Partnership.
In March, Congress approved a $2.2 trillion package, aiming to provide economic relief during the pandemic.
It included the Paycheck Protection Program, a lending model designed as an incentive for small businesses to keep employees on their payroll. Small-business owners are also eligible for an emergency loan of up to $10,000 through the Economic Injury Disaster Loan Advance program.
The first round of PPP was exhausted in a matter of weeks, prompting lawmakers to push through renewed funds for the program. More than $300 billion for the loan program was approved last week and signed Friday by President Donald Trump.
But SBA loans have not, in the past, gone to many north St. Louis businesses. And advocates worry now that the new loans again will be out of reach for businesses in poor, minority neighborhoods here.
“The more resourced communities probably got access to those loans faster and quicker,” said Kevin Wilson, executive director of the Small Business Empowerment Center. “However, no information has come out on that so far.”
Fewer north city loans
The Post-Dispatch analyzed data showing loans deployed through the U.S. Small Business Administration 7(a) program in St. Louis over three decades, from 1991 to the fall of 2019.
The loans are made by banks and other lenders, and guaranteed by the SBA.
Out of 1,683 projects with 7(a) loans within city boundaries since 2010, 1,165 were applied for by businesses based in St. Louis city.
Of those, 215 loans were for businesses in north St. Louis neighborhoods.
The data also shows that decade-to-decade, even as the total number of 7(a) loans in St. Louis increased, the number deployed north of Delmar declined. Between 2010 and 2019, 16% went to north St. Louis, down from 21% in the 1990s.
SBA’s 7(a) loans are not a comprehensive look at lending: Many businesses can get loans that aren’t backed by the SBA, and some need amounts that would generally be too small for mainstream finance.
Moreover, the lack of SBA loans in north St. Louis doesn’t necessarily mean north St. Louis businesses are getting rejected at higher rates: The SBA does not track the total number of applicants and loan denials.
And St. Louis, particularly north St. Louis, has struggled with population loss for decades. Fewer residents, naturally means fewer businesses. Of 6,558 business licenses in St. Louis between January 2019 and November 2019, only 20.8% of them, or 1,361, were licensed under addresses north of Delmar Boulevard.
But advocates say it is clear that businesses in poorer communities don’t have the relationships with banks that would lead to SBA loans. Some are probably applying and getting rejected. Others aren’t applying at all, because they simply don’t see banks as a viable option for them.
“I think even in your more under-resourced communities, there’s always plenty of small businesses there,” Wilson said. “I just think that a lot of lending institutions don’t lend there.”
And that’s frustrating for north St. Louis business owners.
“People need to understand that there is a market north of Delmar,” said Cortaiga Collins, owner of the Good Shepherd Infant and Toddler Center at 5990 Page Boulevard.
Collins said that when she started her business in 2009, she would not have been able to get traditional funding, such as SBA loans. Her credit was not good enough.
Instead she said she received a grant, and went to local microlender Justine Petersen for help.
Today she has two locations and 13 employees, and is licensed to care for 57 children.
When the novel coronavirus outbreak hit, Collins closed down Good Shepherd for two weeks as a precaution. She later reopened to only serve first responders and health care workers.
She said she has secured PPP funding, which will ease the financial burden she’s felt during the pandemic.
But broadly, Collins sees a lack of investment in the community where she works. She sees businesses choosing to locate elsewhere, forcing people in the neighborhood to travel outside for the services they need.
“They don’t respect our purchasing power,” Collins said. “They don’t see that there is money to be made here.”
Building resources
Area organizations are making efforts to connect minority business owners with funding.
The St. Louis district office of the SBA formed a strategic alliance with the Urban League of Metropolitan St. Louis, with the goal of increasing outreach to underserved communities.
Maureen Brinkley, district director of SBA St. Louis, said in March that the partnership is the first of its kind, and potentially a model that could be adopted in other parts of the country.
The SBA also launched an online referral tool in 2017 that connects businesses with lenders. Entrepreneurs answer questions about their business needs, and are contacted by interested parties. Since the tool can connect business owners with lenders anywhere in the country, SBA officials say it has expanded options for entrepreneurs.
PNC Bank donated a bank branch to the Urban League in 2019, which will become a place for small business owners to go for entrepreneurial training by the SBA St. Louis office and other organizations, like the Missouri Small Business Development Center and the Veterans Business Resource Center.
And last year, Justine Petersen said it would use a $200,000 investment from JPMorgan Chase to help small, north St. Louis businesses get loans.
“Localized community development tends to require critical mass, and it requires a starting point,” said Galen Gondolfi, chief communications officer for Justine Petersen. “I don’t believe that we’ve begun.”
Jacob Barker of the Post-Dispatch contributed to this report.