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Magic Johnson will provide $100 million to fund loans to minority-owned businesses

Magic Johnson attends a game between the Kentucky Wildcats and the UCLA Bruins in 2017. By Harmeet Kaur, CNN

(CNN) -- Magic Johnson may no longer be playing in the NBA, but the Hall of Fame member is still making valuable assists.

Johnson announced that EquiTrust Life Insurance Co., of which he owns a majority, is providing $100 million in capital to fund federal loans for minority and women business owners who have been hit hard by the coronavirus pandemic.

EquiTrust 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.

The loans are aimed at supporting people of color and women who operate businesses in underserved communities, according to a news release.

The news was first reported by The Wall Street Journal.

"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," Johnson said Sunday on MSNBC. "... We wanted to make sure that minority-owned businesses got small business loans through the PPP program."

Concerns about people of color accessing loans

The partnership was borne out of a concern that women and people of color were having difficulty accessing the loans offered by the Small Business Administration's emergency coronavirus relief program -- part of the federal government's massive stimulus package.

"Johnson's EquiTrust is providing critical financial support to underserved communities and businesses that have been traditionally neglected," EquiTrust and MBE Capital Partners said in a joint news release. "These small and diverse businesses often have difficulty developing strong lending relationships with big banks."

The goal is to help 100,000 businesses secure resources that will sustain them through the pandemic, MBE Capital CEO Rafael Martinez said on MSNBC.

SBA program has come under criticism

The Paycheck Protection Program has been plagued by technical hiccups and questions about whether lenders were prioritizing the businesses that needed the money most after several deep-pocketed 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 initial $349 billion Congress allocated to the program ran dry, lawmakers replenished the fund with an additional $310 billion. Still, there have been concerns that money earmarked for smaller lenders is running low.

Advocacy organizations say businesses owned by people of color are inherently at a disadvantage. The funds are accessed through banks and participating SBA lenders -- relationships that people of color are less likely to have.

The Center for Responsible Lending estimated in April that approximately 95% of black-owned businesses, 91% of Latino-owned businesses, 91% of Native Hawaiian or Pacific Islander-owned businesses and 75% of Asian-owned businesses were unlikely to receive a PPP loan through a mainstream bank or credit union.

The federal CARES Act, which created the Paycheck Protection Program, instructed the SBA to prioritize underserved and rural markets. But a recent inspector general report found that the agency had not communicated this priority to lenders.

The report also found that the SBA did not require demographic data to identify borrowers of the program in underserved markets, making it hard to determine how much funding was going towards the intended communities.

The-CNN-Wire™ & © 2018 Cable News Network, Inc., a Time Warner Company. All rights reserved.

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SportingMan 16 days ago
How is this not racist? I'm a middle aged white guy..if I offered to loan money to only white people I would be crucified by the media and would have Jessie Jackson complaining. Pathetic. Someone step up and call this as it is...racist!
Lawrence SportingMan 12 days ago
The number of working African American business owners in the United States plummeted more than 40 percent as the coronavirus shut down much of the economy — a far steeper drop than other racial groups experienced, according to an analysis confirming fears the pandemic would deepen inequalities in the business world.

sooo racist against poor you.
Darryl 18 days ago
Wow just to comment on this article. I myself am a black man with a small limousine company in Roosevelt Long Island and I applied to the SBA twice and they gave me the same ole BS in unsatisfactory credit history, which I thought was a whole bunch of you know what. In the mean time how I’m drowning and my business has really taken a turn for me to be out of business if thing don’t turn around for me very soon. SBA didn’t do me any justice at all in no shape form or fashion. Didn’t speak with anyone about nothing same 2 letters saying the same thing so we didn’t even have a chance from the start and AMERICA think it’s fair, when we didn’t have a chance from the start. DEPRESSED LIVING IN NEW YORK MY WHOLE LIFE. ITS SO SO DISGUSTING THAT IM SICK
Lawrence 18 days ago
Whatta guy. If it was Turnip, he would send them a bill for using his name.
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