A new investment fund recently expanded to eight of the state’s poorest cities will be aimed at helping to keep Black and Brown-owned businesses they say have been left out of federal COVID-relief programs afloat.
The Newark FAM Fund – short for “Newark Forty Acres and a Mule” – rolled out in September with a goal of raising $100 million, $10 million of that through the first quarter of 2021. It’s been run by the quasi-government non-profit Invest Newark, originally starting in its namesake city.
Investment dollars from the fund are geared toward businesses based in some of the state’s poorest cities, which have some of the highest concentrations of people of color: Orange, Paterson, East Orange, Camden, Trenton, Newark, Atlantic City and Irvington.
Newark Mayor Ras Barka said the fund was born out of a lack of federal Paycheck Protection Program COVID-19 relief loans going toward Black and Latino-owned businesses,” who had no way to get access to capital,” and were ultimately “pushed aside” in the existing federal relief program.
“There has been a history of discrimination, a history of an inability to access capital, a very definitive, systematic and deliberate locking out of Black and Brown-owned businesses of getting loans,” Baraka said during a Feb. 18 remotely-held press conference with several of the cities’ mayors.
“Even in the PPP, we can’t get access to PPP because we don’t have relationships [with] those financial institutions.”
An August 2020 study from the Federal Reserve reported that less than 20% of businesses in majority Black and Brown counties received PPP loans. A study that same year from the National Bureau for Economic Research found that the number of Black-owned businesses in 2020 shrunk 41%, compared to Latinix-owned businesses which shrunk 32% and White-owned businesses which shrunk just 17%.
According to the federal Small Business Administration, which runs the PPP program, the agency awarded nearly $4 billion of PPP loans to over 42,000 New Jersey businesses in 2021, and another $17 billion in 2020.
Some of the financial backers so far include AT&T, Panasonic and RWJBarnabas Health, according to Bernel Hall, the fund’s managing partner. New Jersey Community Capital is assisting in the fundraising.
Hall said that the financing available under the fund will include loans to Black and Brown-owned real estate developments and acquisition, as well as small business grants and loans, he added.
It’s a lucrative pitch for banks looking to fulfil their obligations under the federal Community Reinvestment Act, which was passed in 1977 to steer investment dollars towards low-and-moderate-income, typically minority communities.
Developers and businesses will be able to submit information for the project or businesses that they need financing for, while donors can also submit information via the website, according to Hall.
“We know that businesses need assistance from running their business and to capital and to address overhead,” said Camden Mayor Frank Moran.
The New Jersey Economic Development Authority said it is pausing a $10 million small business loan program in order to gauge where the PPP program falls short, such as the financial needs for minority-owned businesses.