Tag: entrepreneurship

Opportunity Zones: 7 years ago, the “Why?” in the “Why!”

In 2017, Opportunity Zones were created through the Tax Cuts and Jobs Act of 2017. That same year, the Minority Business Development Agency (the MBDA) conducted a study which focused upon differences in, A) access to financing, and B) financing costs, for businesses owned by White business owners, as compared to businesses owned by minority business owners.

The same year Opportunity Zones were created – in 2017 – the MBDA reported that the average loan provided to White-owned businesses totaled $310,000. And how about for minority-owned businesses? Financing provided to minority-owned businesses – according to the MBDA study – dropped substantially. To $149,000. That $149,000 financing amount…less than half of the amount which had been made available to White business owners.

OK, so how about the cost-of-credit?

According to the 2017 MBDA study, the average interest rate paid by minority-owned businesses had been 7.8%. For White-owned businesses? The cost-of credit was significantly lower. It was 6.4%.

So the 2017 MBDA study showed how White business owners paid less for the money they borrowed than minority business owners paid. And they were able to borrow quite a bit more money too.

In looking at findings in the 2017 MBDA study, one may have thought, it seemed to be rather expensive to not be White in business.

Opportunity Zones are merely one building block. In a building. A building that has a lot more floors that need to be built. Long before the building is even close to being complete.

Opportunity Zone: an economic development tool that allows people to invest in distressed areas in the United States

Many news pieces as of late featuring Opportunity Zone proponent- devout Christian – South Carolina Senator Tim Scott. So a little bit here about one reason Senator Tim Scott cares so deeply about Opportunity Zones: ACCESS TO – OR A LACK THEREOF – FINANCING FOR BUSINESSES OWNED BY BLACK AMERICANS

According to a Federal Reserve report I read a few years ago, Black business owners apply for bank financing at a slightly higher rate than White business owners do. Yet, according to the same report I read, just over fifty per-cent of Black business owners are turned down for business financing. The turn-down rate for White business owners? It’s about half of that rate – it’s about 25%. 

Ok, so how about the turn-down rate for business financing applied for by Asian American business owners? The turn-down rate for business financing applied for by Asian American business owners had been – according to the report I read – just about 35%. 

How about for Hispanic business owners? According to that same report, the turn-down rate for business financing applied for by Hispanic business owners had been a little under 40%.

Access to financing – or a lack thereof – for American businesses which are owned by Black Americans… No one purports to proclaim that there is any sort of quick fix to inequality. This being said, support for – and continued interest in – Opportunity Zones has multiple facets applicable to “upside.” Tim Scott, is right.