An Analysis of SBA Loans in Lower-income and Black neighborhoods in Detroit and Michigan

Robin G. Newberger and Maude Toussaint-Comeau

Profitwise, 2014, issue Spring, 1-26

Abstract: In this article, we analyze the extent to which the Small Business Administration (SBA) 7(a) loan guarantee program helps facilitate flows of credit to small businesses in the city of Detroit, and to black and low- and moderate-income neighborhoods in Michigan. In an environment of financial austerity and constrained small business credit, federal government programs like those administered by the SBA can facilitate lending to businesses. The SBA administers several programs designed to encourage lenders to provide loans to small businesses that might not otherwise obtain financing on reasonable terms and conditions. In the SBA?s primary business loan program, the 7(a) program, the SBA guarantees as much as 85 percent for loans of $150,000 or less; up to 75 percent for loans over $150,000; and up to 50 percent for loans made under the SBA Express program. Using SBA data for the state of Michigan, we revisit the question of whether SBA 7(a) lending fills gaps in the credit market to small businesses in lower-income and minority areas in a case analysis of Detroit.

Date: 2014
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