he number of small businesses owned by Minnesotans of color is growing — and not by chance.
Honest conversations about inequities, including bank lending and job opportunities, occurred after the police killing of George Floyd and the riots that followed. They prompted entities from governments and banks to companies and nonprofits to pledge money for all sorts of support programs.
This included promises to increase lending to small businesses led by people of color, which routinely have had a hard time securing traditional bank loans.
Partly because of demographic changes and partly because of opportunity, the percentage of Minnesota businesses owned by people of color grew from 6.3% in 2007 to 11% in 2017, according to the Census Bureau.
Updated census data are due out next month. But other government entities report their numbers show significantly greater growth in the last two years. The number of Small Business Administration (SBA) loans in Minnesota to Black businesses grew 250% from 2020 to 2021. The loans to Asian businesses grew 112%, and to Latino companies, 9%.
"That is a pretty big pop," said Minnesota SBA District Director Brian McDonald.
The SBA was aggressive about reaching businesses hurt by the riots and the pandemic.
Loan officers explained how the Paycheck Protection Program and other SBA loans worked and helped vendors apply. The agency sent bilingual loan officers to places such as Mercado Central, Midtown Global Market, the Hmong Village Shopping Center and the African Development Center.
They also used more "micro-lending partners" to get loans into minority-owned businesses, which helped increase total SBA lending across all races in Minnesota by 63% in 2021. SBA nonprofit partner organizations included groups such as Meda, the Neighborhood Development Center, the Hmong American Partnership and the Minnesota American Indian Chamber of Commerce.
With the pandemic, riots, shipping delays, labor shortages, rising interest rates and inflation, "there have been a lot of headwinds for young entrepreneurs of color during the last two-and-a-half years," Meda CEO Alfredo Martel said. "But there are organizations like Meda. We have [all] resolved ourselves to scale our solutions to the size of the challenges."
Last year, Meda lent $65 million to 702 firms owned by people of color. It processed 300 PPP loans during the pandemic.
Across the Mississippi River in St. Paul, the Neighborhood Development Center has trained 5,000 low-income and diverse business owners since 1993 to run their own restaurants, day-care centers, bakeries, tax centers, car repair and other shops in working-class neighborhoods.
Warren McLean, president of the Minneapolis-based Northside Economic Opportunity Network (NEON), said many young entrepreneurs of color often need coaching as much as capital.
"We are extremely hands on," McLean said. "We get in the trenches with our clients."
Take licensed therapist and social worker Anissa Keyes, for instance.
After three banks turned Keyes down for loans, NEON's Stephen Obayuwana showed her how to create proper profit and loss statements and other formal business documents needed by banks to finance her growing Arubah Emotional Health business.
Obayuwana then introduced her to the Community Reinvestment Fund, which financed Keyes' first building loan in 2017. When her client load doubled and she needed more room to treat the 670 mentally ill or traumatized clients the city was sending her way, CRF lent her $3 million to buy and renovate the Camden Park State Bank on 42nd and Lyndale avenues in north Minneapolis.
She closed on the loan Nov. 30. The next day, the largest tenant in the building, Mykonos Coffee & Grill, announced it was closing in 30 days.
Panicked, Keyes turned again to NEON, which lent Keyes $41,000 at 2% interest so she could buy the restaurant's equipment and find a new tenant. A new restaurant tenant, Heal Minneapolis, opens Thursday.
"NEON saved me," Keyes said. "NEON made it possible to go forward with my project. I don't know what would have happened without that."
General Mills recently awarded NEON $300,000 to help fund BIPOC-owned food businesses in north Minneapolis.
Last year, the Otto Bremer Trust, Mortenson Construction and the Phillips Family Foundation awarded NEON $1.4 million so developers of color could fund construction projects in Minneapolis. NEON officials plan to grow that loan pool to $5 million.
The SBA is also working with NEON and its partners to issue low-interest real estate loans to NEON's growing roster of clients. SBA's involvement stretches dollars and helps NEON reach more people.
That's the goal, McDonald said.
"Thing have dramatically changed in the last few years for us as an agency with pandemic relief," McDonald said. "We have been an agency that was at the forefront of [increasing] lending numbers" to minority businesses.