As part of an effort to help Black-owned businesses secure the capital needed to expand, the federal government plans to pump money into smaller community financial institutions across the country.
Deputy Treasury Secretary Wally Adeyemo detailed the program in Memphis on Tuesday during a meeting with Black female business owners. The wide-ranging discussion at The Four Way was part of a stop in the Bluff City to tout the successes of the American Rescue Plan Act passed one year ago.
Adeyemo said community financial institutions, especially those that are Black-owned, are more likely to lend to Black entrepreneurs. However, without the deep pockets of larger banks, they aren’t able to lend as much. The Biden administration hopes this cash injection will help bridge that gap.
“Talent exists everywhere, opportunity does not,” Adeyemo said.
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Jennifer Ransom, head of local general contracting firm The Ransomed Group, said she once almost lost a $4 million contract after two banks refused to lend to her. She eventually secured a loan because the father of her son’s classmate, who works at a large financial institution, worked out a loan for her.
While she was able to make that personal connection, for many Black entrepreneurs, that path does not exist the way it does with longer-established businesses, Ransom said.
Cristina McCarter, co-owner of City Tasting Box and Feast & Graze and owner of City Tasting Tours of Memphis, said she had also struggled to secure loans from legacy financial institutions due to the newness and unique nature of her food-related businesses.
“But you can’t expand without capital,” she said, adding the situation perpetuated a cycle that stifled entrepreneurship.
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Multiple women at the lunch meeting Tuesday also said the Memphis market faced labor issues because many young people leave Memphis for college or training programs in cities like Nashville and Atlanta but don’t return to Memphis.
Patrice Thompson, owner of The Four Way, said she was working to mentor young people in Memphis and encourage them to keep their skillset in the local market.
“I tell them, ‘Get what you can get out there and bring it back home,’” she said.
But the problem persists. Ransom said her business also struggled to find employees due to the lack of skilled construction workers in the market. She has worked with schools to introduce trade education and offer internships to students. But the problem, she said, is often with parents who want their children to pursue higher education rather than vocational training.
Adeyemo agreed, saying many people are dissuaded from pursing career paths that don’t require a four-year college degree.
“Truck driving is a great job, but nobody wants to do it,” he said.
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One of the other challenges facing small businesses today, the business owners said, is inflationary price increases, which hit small businesses with thin profit margins particularly hard. Ransom said her industry, in particular, was “at the mercy of the market.”
Adeyemo said at the moment the treasury department was spending a lot of its time focused on the war in Ukraine and implementing sanctions on Russia. However, he said the president had directed him to continue to focus on aiding small businesses struggling with the lingering economic impacts of the pandemic, supply shortages and limited access to capital.
In the coming weeks, the administration will also be rolling out a small business credit initiative, separate from the plans to pump money into community financial institutions.
The war in Ukraine will have economic implications for Americans, Adeyemo said.
“There will be some cost,” he said. “But my goal, and the goal of the president, is to mitigate that as much as possible.”
Corinne S Kennedy covers economic development and healthcare for the Commercial Appeal. She can be reached via email at [email protected]
This article originally appeared on Memphis Commercial Appeal: Biden administration to pump money into community banks: How it helps