New Economic Justice Loans Set New Standard for Minority Business Lending

3% fixed interest, No fees, No Credit Scores, Decisioned by Peer Lending Committee

March 2, 2022

For Immediate Release

WASHINGTON, D.C. — Former U.S. Comptroller of the Currency and current LISEP Chair Gene Ludwig and NACA CEO Bruce Marks today announced a groundbreaking lending program for minority-owned businesses. Economic Justice Loans will be a model for financial institutions, financial regulators, and the government to address economic inequality created by a long-term inability to access capital with favorable terms. This program will offer fixed, low-interest loans to people lacking wealth and high credit scores, and who have been subject to systematic racism.

Economic Justice Loans will provide some of the best terms for small business loans available anywhere. Borrowers will receive the extraordinarily low 3% fixed interest rate, no fees or closing costs and other favorable terms tailored to fit the individual borrower's needs. Peer lending committees from within the community will meet with each borrower to review the loan application feasibility without consideration of their credit score. Borrowers will need to demonstrate how their loans will positively affect their communities or address economic and social inequality. The loans are available to borrowers nationwide and funds will be given to borrowers quickly, without the lengthy paperwork, prohibitive credit and collateral requirements, fees and other roadblocks that traditional loan programs require. Borrowers can apply for the loans here: www.economicjusticeloans.com.

"Low- and middle-income Americans, and minority groups in particular, have long struggled to access capital at anything short of usurious terms with burdensome interest rates and outrageous fees," said Ludwig, Chair of the Ludwig Institute for Shared Economic Prosperity (LISEP). "LISEP is partnering with NACA on this innovative loan program to demonstrate that capital for people who aren't wealthy doesn't have to send them further down the economic ladder. Our goal is the opposite. These loans will help people build businesses and improve neighborhoods without saddling them with piles of unaffordable debt."

Minority-owned businesses and startup entrepreneurs have faced multiple barriers to capital due to a history of discrimination in lending, including structural discrimination that has blocked the ability to build generational wealth.

"This lending model provides the foundation for hundreds of millions of dollars in additional lending," said Bruce Marks, CEO and founder of NACA, the Neighborhood Assistance Corporation of America. "We have learned that if you build it they will come. NACA's Best in America Mortgage, targeting underserved communities, started with a few million dollars in commitment and now has over $20 billion. We expect the same outcome with extraordinary terms and community-based decision process built into the Economic Justice Loans program."

Background

‍Economic Justice Loans provide businesses in low- and moderate-income communities a new source of financial relief. The program seeks to overcome barriers to capital by making funds quickly available and affordable to start, grow, or expand small, minority-owned businesses or to make improvements to neighborhoods. These barriers have been plentiful. The 2021 Small Business Credit survey, published by the U.S. Federal Reserve, uncovered that in 2019 and 2020 businesses owned by people of color were less likely to be approved for financing. Just 13% of Black-owned firms that applied for financing were approved, versus 40% of White-owned firms. Even among firms with good credit scores, Black-owned firms were still half as likely to receive financing as White-owned firms. This reality emerges from centuries of blatant discrimination, including the atrocity of redlining in the 20th century, that has hurt the Black community's ability to build wealth. And for those who have had no other financing options except payday loans, in 2020 borrowers faced a nearly 400% interest rate for a two-week loan, according to the Consumer Financial Protection Bureau.

New Economic Justice Loans Set New Standard for Minority Business Lending

3% fixed interest, No fees, No Credit Scores, Decisioned by Peer Lending Committee

‍Jim Gardner

March 2, 2022

For Immediate Release

Additional Resources

Historically, systemic barriers have disproportionately hampered Black farmers’ ability to retain land ownership.

Despite this tragic history, there is still time and economic incentive to set some of the inequities right.

In 2021, working mothers with children under 18 earned just 61.7 cents for every dollar a father made. Much wider than the overall gender wage gap, this difference highlights both the motherhood penalty and the fatherhood premium.

Female-dominated, low-paying, part-time occupations are overrepresented among informal workers who also have a formal job.

We need to create an economic environment where companies can hire these workers as employees and pay them a living wage. There are steps policymakers can take to change the gig economy dynamic.

Dependency on tips over base pay is growing because of actions taken by gig companies to institute tipping.

Even for those lucky enough to be making what amounts in many states to the poverty wage of $15 per hour, many will get nothing but a week’s notice before being out on the street.

One study shows that consistent involvement in extracurricular activities increased a child’s likelihood of attending college by a whopping 400% compared to not being involved at all.

Studies have found that both men and women are paid less if they work in “nurturant” occupations.

Since 2015, the correlation between LISEP’s functional employment to population ratio and the inflation rate was more than four times as strong as the BLS’s employment to population ratio, which is depicted in the graph below.

The employment to population ratio settles the discrepancy between what we see around us and what the data says.

The NBER paper defines employment using the traditional BLS U-3 rate. However, the often-used U-3 number fails to capture the quality of jobs.

Among states with stricter COVID-19 policies, reducing unemployment benefits had little to no effect. The average effect of increased employment seems to have occurred only in those states with looser COVID protocols.

Background

Press Contact:

‍Jim Gardner

press@lisep.org

(573) 680-1822

Additional Resources:

No items found.

About LISEP

The Ludwig Institute for Shared Economic Prosperity (LISEP) was created in 2019 by Gene Ludwig and his wife, Dr. Carol Ludwig. The mission of LISEP is to improve the economic well-being of middle- and lower-income Americans through research and education. LISEP’s original economic research includes new indicators for unemployment, earnings, and cost of living. These metrics aim to provide policymakers and the public with a more transparent view of the economic situation of all Americans, particularly low- and middle-income households, compared with misleading headline statistics. On X: @LISEP_org.

About NACA (Neighborhood Assistance Corporation of America)

Started in 1988, NACA is the largest HUD-approved nonprofit, community advocacy and homeownership organization in the United States. NACA has been at the forefront in fighting predatory lending and has been the most effective organization in providing affordable solutions to over 250,000 homeowners. NACA provides the best mortgage in the country through its 48 offices nationwide. NACA's founder and CEO Bruce Marks was named Bostonian of the Year for 2007 because of his work in getting the major lenders and servicers to modify home loans. He has also testified before Congress on numerous occasions, including Sept. 12, 2000, being one of the few to sound the alarm of the pending mortgage crisis. For more information, please visit www.naca.com.