Former NBA all-star Magic Johnson announced that EquiTrust Life Insurance Co.
is providing $100 million in capital to fund federal loans for minority and women-owned businesses that have been hit hard by the COVID-19 pandemic.
Johnson owns the majority of EquiTrust and it is reported that the insurance company will work with MBE Capital Partners, a lender that specializes in asset-based loans for minority-owned small businesses, to distribute the loans through the federal government’s Paycheck Protection Program.
According to a news release first reported by The Wall Street Journal, the loans are aimed at supporting women and people of color who operate businesses in underserved communities.
On Sunday, Johnson said on MSNBC: “These are incredible businesses, small businesses, that have been the pillar of our community that also employ a lot of black and brown people in our community.”
“We wanted to make sure that minority-owned businesses got small business loans through the PPP program.”
The partnership stems out of a concern that people of color and women were struggling in accessing the loans offered by the Small Business Administration’s emergency coronavirus relief program.
“Johnson’s EquiTrust is providing critical financial support to underserved communities and businesses that have been traditionally neglected,”
In a joint news release by EquiTrust and MBE Capital Partners, they said that the small and diverse businesses often have difficulty developing strong lending relationships with big banks.
MBE Capital CEO Rafael Martinez said on MSNBC that the goal is to help 100,000 businesses secure resources that will sustain them through the pandemic.
The Paycheck Protection Program or PPP has been plagued by questions and technical hiccups about whether lenders were prioritizing the businesses that needed the money most after several big companies received loans, including the Los Angeles Lakers, the storied NBA franchise that Johnson was long affiliated with.
The team returned the money.
After the first $349 billion Congress allotted to the program ran out, lawmakers replenished the fund with an additional $310 billion. However, there have been concerns that money earmarked for smaller lenders is running low.
The advocacy organizations say that businesses owned by people of color are at a disadvantage. The funds are accessed through banks and participating SBA lenders, relationships that people of color are less likely to have.
In April, the Center for Responsible Lending estimated that around 95% of black-owned businesses, 91% of Native Hawaiian or Pacific Islander-owned businesses, 75% of Asian-owned businesses, and 91% of Latino-owned businesses were unlikely to receive a PPP loan through a mainstream bank or credit union.