1. Econ Dev Corp loans are high interest 8%-12% when Fed rates have been 0% for four years and they charge another percentage for initiation
2. All other resources available are contingent on both a credit score over 600 and sufficient credit plus collateral when their charter says these are for disadvantaged, not credit-worthy applicants
3. It creates a barrier to entry into the business startup arena for disadvantaged, minority and women-owned businesses rather than a barrier removal
4. No other grants, incentives, non-profit foundation backing, mentorship, or other resources are available if the loan packages aren’t approved.
5. They are literally given our tax money to do these loans and are breaking the charter under which these moneys are given to them by engaging in these practices.
The government funds business development corporations with the mission to provide low-interest financial products and help to people wanting to start a business or expand a business. Tax money makes up nearly all the funds these for-profit and non-profit organizations have to lend. They have the money based on helping people, women-owned businesses, minority owned businesses and under-served communities to have access to low-interest loans even with little, low, no or bad credit ratings.
Those conditions are NOT being honored. Most in NYC are requiring a credit score of 600 to even be considered, Accion accepts no less than 587, and many, if not all – won’t even consider helping with loans, grants or startup incentives for a business where there is insufficient credit.
That isn’t all. The Fed Rate is at 0% for its lending rate, recently having been raised slightly by .01% – and most banks offer more attractive rates than any of these supposedly “low interest rates” which currently are 8% – 12%. Over the last four years, as the Fed rate has been at 0% – none of these economic development loan groups and other startup resources set up with money from our government to help start small businesses have changed their percentage rates for interest to reflect the new reality. At 12%, there is nearly no way to consider these as low interest loans. Banks, bonds and other types of financial products are charging somewhere around 4% and less, but not the corporations designed to help start the under-served, disadvantaged communities with startup and operating capital.
So, not only could I personally never get a loan to startup a business and consequently will have to remain on welfare for the remainder of my life, as well as my grown children and their toddlers being on welfare to not be homeless, because we have insufficient credit and less than stellar credit, but even if we were to get those loans, they would eat up any company profits before ever seeing them. It isn’t only not fair, it isn’t right and it is far from legal for them to withhold these resources from us given their mission and the charter under which they are founded in order to operate..
We are qualified to start, run and accomplish the business we have set out to do. The community will have an asset for us doing it rather than the liability they currently have with all of our households running amuck in poverty and near homelessness with our only access to economic resources being welfare and welfare assisted programs and low paying jobs that don’t pay the rent.
The damage to us is obvious and I guarantee that if these funding opportunities were denied to us, they have been also denied to thousands of women and minority startup businesses. We could have qualified for several state and federal incentive programs by employing all of us at a viable business rather than continuing on public assistance, our communities could have been enhanced by the business we have designed, and the opportunities for three generations of our family, including my young grandchildren could have risen from poverty and welfare to entrepreneurship and equality of opportunities.
And, worst of all, I know that these companies, corporations and quasi-public/private development corporations were given our tax money and my community’s tax moneys in order to help us and people like us to start a business and to get it on a firm footing to be competitive from the outset with true low-interest, non credit rating dependent products, incentives and opportunities. That makes what they are doing, both illegal and in complete disregard of the policies which formed the foundations of their operations at every point in the process.
They have cheated me and my daughters this week and countless thousands of others like us who would’ve most certainly been summarily refused as well, along with stealing from those who they did loan money at interest rates which are four times higher than the national average for a mortgage or other loan product.
They should all be responsible for correcting that fact from the point the Fed rate was lowered to zero for every single business and business owner that was impacted by it and they certainly all have been. This is inexcusable.
And, considering that these financial business loan companies have the mandate to provide credit and loan products to economically disadvantaged and under-served populations, and those with credit scores less than stellar in order for them and us to build businesses – and they are, in fact, not doing it that way – this matter needs to be turned over to the Justice Department for consideration. It is fraudulent for their charters and rights to free access to our state treasuries’ moneys and our national federal dollars to state it is to promote one thing when they are refusing to do that as a matter of practice.
By the way, two other practices being used by these companies are also illegal and against the policy law providing for their charters – one is that they nearly all require collateral such as home equity in order to secure the loans, which means they may as well be a bank rather than what they are supposed to be and, second is that they nearly all require very short repayment schemes and many require at least a year in operation with records to show the business’ activities – even for startups who would simply not have that, but “it is their policy.”
These practices effectively removes the startup businesses from consideration for any of their loans, incentives, grants through their organization and any access to the multitude of other funding and information / mentorship resources in the community that have been put into their hands to help small, minority-owned, women-owned, under-served, economically and otherwise disadvantaged populations – owned businesses startup, expand, grow and succeed. (and be competitive against much better funded competitors across a global marketplace.)
Please fix this immediately – the national, regional and local economies need these small businesses and equal opportunities to employment, to jobs and to create businesses that can provide employment. This can’t be left as they’ve decided to manage and do this. It is unlawful, damaging to our communities and individually, barrier sustaining rather than removing those barriers to credit products to startup businesses and equal opportunities to fund those businesses appropriately.
These things represent unfair trade practices and are fraudulent to be portrayed as any real access to capital and resources for startups in disadvantaged communities or to disadvantaged populations, including women, and minorities. It is a form of loan sharking and completes a fully funded barrier to those populations for starting a business, in fact. The other incentives, resources, grants and access to programs to help the startup business under these policies are all contingent on the applicants being accepted for their credit products or otherwise – none of these other things are available either. It is completely and significantly a barrier to economic opportunities and equality to access them.
And yes, it is four times higher in interest rates than for traditional banking products, bonds and other commercial financial products because these companies are charging loan initiation fees of 1% on top of all that which is thoroughly illegal and represents nothing but the same loan sharking process that got our nation into this mess in the first place.