Ottawa, banks approve millions in loans to reduce barriers for Black entrepreneurs

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Major lending programs for Black entrepreneurs have quickened their paces after a slow start, with Canadian Imperial Bank of Commerce approving $8.5-million in loans and grants and Ottawa authorizing about $35.1-million in loans so far.

After the killing of George Floyd in 2020, the federal government, major financial institutions and Black community groups spent months discussing how to knock down some of the barriers that Black businesses disproportionately face in accessing capital. Ottawa and major banks almost came together to launch a new national lending initiative, but the banks walked away to run their own programs.

The major federal vehicle is the Black Entrepreneurship Loan Fund. It provides loans of up to $250,000 and is administered by the Federation of African Canadian Economics, with $130-million in credit from the Business Development Bank of Canada, or BDC.

FACE had a difficult first year after launching in the summer of 2021, as thousands of enthusiastic entrepreneurs rushed to apply and the organization was not set up to handle the volume.

Tiffany Callender, chief executive officer of FACE, said the non-profit matured over its second year, building a staff of 50 that includes a more robust lending team and customer-service department. “We’ve grown exponentially as an organization,” she said.

FACE has approved 481 applications worth a total of $45.6-million, out of the more than 3,500 complete applications it has received. But those entrepreneurs also have to be approved by BDC to get funds. The Crown corporation said it approved 364 applications worth $35.1-million so far, with another 20 under review.

BDC said of the 97 other applications, some were turned down because of know-your-client and anti-money-laundering considerations. And others were abandoned by the client based on the terms of the loan offer or a change in circumstance.

The Globe and Mail asked the Big Six Banks about the status of their Black entrepreneur programs. Of the six, only Canadian Imperial Bank of Commerce would reveal the value of loans it has approved so far.

CIBC launched its program in February, 2022, and provides loans of up to $250,000 for equipment, leasehold improvements and working capital. The bank said it has approved $6.5-million of the $13-million it budgeted for the program. It has also provided $2-million to the Black Opportunity Fund for the charity to spend on grants and training for entrepreneurs who were declined or not yet ready for the loans.

The BOF works with the banks to varying degrees. Craig Wellington, BOF’s executive director, said the banks’ programs are “all in relatively the same ballpark” in terms of the total amount of loans they’ve approved and the number of entrepreneurs turned away.

He said banks are reluctant to share numbers for competitive reasons, but, “if you’re not transparent, people assume you’re hiding something.”

Toronto-Dominion Bank took a slower approach to developing its programs. It launched its Black Entrepreneur Credit Access Program in February.

Latanya Housen, a Black customer experience relationship manager at TD, said the bank is trying to change how entrepreneurs and advisers work together.

“The idea is to connect with the client on a deeper level to understand or to explain the barriers they’re facing and then to figure out how we can circumvent that in a way that is within our risk appetite,” she said.

She said education is a big part of the discussions. For example, some clients with a business that is already operational and generating money may not see the need for a business plan, but loan adjudicators like to see one.

Adesola Ogunsakin, owner of Retro Bags in London, Ont., received a loan from TD and said it was a positive experience. “I was approached with empathy, I was approached with understanding, at the level I haven’t experienced at other banks,” she said.

Bank of Montreal launched its Black entrepreneur program on Feb. 14, 2022, to provide educational resources, networking and working capital, with loans of up to $150,000. BMO said it recently expanded the program through its network of branches and saw “promising momentum,” but provided no further details.

Ash Phillips and Miro LaFlaga, co-owners of the Six Cinquième design agency in Montreal that recently helped rebrand the Centre for Canadians of African Descent, said their experience in BMO’s program was a “breath of fresh air.”

“They were really open to feedback,” Ms. Phillips said, and added: “We really felt supported and encouraged and empowered in our entrepreneurial journey.”

Royal Bank of Canada was the first to launch a loan program in 2021 as part of a larger five-year, $100-million commitment to Black entrepreneurs. Some of the money went to support a Black Entrepreneur Startup Program run by national non-profit Futurpreneur. RBC declined to say how much of the funding commitment has been spent so far.

Bank of Nova Scotia launched its program in June, 2022. It said its loans may have longer amortization, no application fee and financing for working capital. It provided no details on how the program has gone.

National Bank told The Globe last year it planned to launch a lending program similar to the other banks. But the bank said recently it was not launching one after all. It has made a $1.25-million donation to the BOF and Mr. Wellington said they are working together on developing an investment fund.

A key concern for all the programs is how long they will continue. Many of the initiatives launched by governments and corporations are set to expire in 2024 or 2025. For example, FACE’s funding runs to March 31, 2025. Many groups are pressing Ottawa to fund these programs permanently.

FACE’s Ms. Callender said she believed there was one clear way for her and other organizations to make their case for permanent funding: “Results.”