Magic Johnson to provide $ 100 million to fund loans to minority-owned businesses struggling with pandemic

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Lakers legend Magic Johnson may no longer play in the NBA, but the Hall of Famer still makes valuable assists.

Johnson announced that he majority-owned EquiTrust Life Insurance Co. will provide $ 100 million in capital to fund federal loans to minority business owners and women who have been hit hard by the Coronavirus pandemic.

EquiTrust will work with MBE Capital Partners, a lender specializing in asset-based lending for minority-owned small businesses, to distribute the loans through the federal government Paycheque Protection Program.

The loans are aimed at supporting people of color and women who operate businesses in underserved communities, according to a press release.

The news was first reported by The Wall Street Journal.

“These are amazing businesses, small businesses, that have been the backbone of our community and also employ a lot of black people and brown people in our community,” Johnson said. said Sunday on MSNBC. “… We wanted to make sure that minority-owned businesses get small business loans through the PPP program. “

Concerns about the access of people of color to loans

The partnership was born out of the fact that women and people of color had difficulty accessing loans offered by the Small Business Administration Coronavirus Emergency Relief Program – part of the federal government’s vast stimulus plan.

“Johnson’s EquiTrust provides essential financial support to underserved communities and businesses that have been traditionally neglected,” EquiTrust and MBE Capital Partners said in a joint press release. “These small, diverse businesses often struggle to develop strong lending relationships with the big banks.”

The goal is to help 100,000 businesses secure the resources that will support them during the pandemic, Rafael Martinez, CEO of MBE Capital, told MSNBC.

The SBA program is criticized

The Paycheque Protection Program was plagued with technical glitches and questions about whether lenders prioritize businesses that need money the most after several companies with deep pockets received loans, including the the Los Angeles Lakers – the NBA franchise with which Johnson had been affiliated for a long time. The team returned the money.

After the $ 349 billion initial congress With the program’s allocation depleted, lawmakers replenished the fund with an additional $ 310 billion. Always, there were concerns that the money reserved for small lenders runs out.

Advocacy organizations say businesses owned by people of color are inherently disadvantaged. Funds are accessible through participating SBA banks and lenders – relationships that people of color are less likely to have.

The Center for Responsible Lending estimated in April that about 95% of Black-owned businesses, 91% of Latino-owned businesses, 91% of Native Hawaiian / Pacific Islander-owned businesses, and 75% of Asian-owned businesses were unlikely to receive a loan PPP through a traditional bank or a syndicate loan.

The federal CARES Act, which created the Paycheck Protection Program, called on the SBA to prioritize underserved and rural markets. Corn a recent report from the Inspector General noted that the agency had not communicated this priority to lenders.

The report also found that the SBA did not need demographic data to identify program borrowers in underserved markets, making it difficult to determine the amount of funding going to target communities.

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