The administrators of the federal Black Entrepreneurship Loan Fund, which has rejected more than 85 percent of applications to date, have not created a way for rejected applicants to independently appeal the decisions, despite it being part of the contract of the administrators with the federal government, documents show.
Ottawa announced the loan fund last May as a way to help black entrepreneurs in need of capital, which has long been a hindrance for some in the community. Entrepreneurs can apply for loans between $25,000 and $250,000. The program is administered by the Federation of African Canadian Economics (FACE), a coalition of five black business organizations, with funding from the federal government and the Business Development Bank of Canada. BDC has final approval of the loans.
More than 16,000 entrepreneurs have applied for a loan, but few have received one. Since the fund’s launch, 1,176 applications have been reviewed and 173 applications approved by FACE and BDC, totaling $16 million in loans as of July 13. The total amount of available financing for loans is $160 million.
Entrepreneurs who were denied loans were believed to have access to a “transparent” appeal system, according to the dues agreement between FACE and the federal government, which was obtained by The Globe and Mail under the Access to Information Act.
“This process should allow for an independent multi-step review of the original decision,” the text of the agreement reads.
However, that appeal system was never set up. In fact, many black entrepreneurs who signed up for the program and spoke to The Globe say they were either not given a decision, or were turned down with no reason given.
Yomi Olalere, president of the Ontario College of Management and Technology, a private career school in Toronto, said he applied for a loan last year. He said he spent time and money putting together his application, which included a business plan, audited financial statements and personal tax information.
His application was rejected in February. FACE’s brief message – which Mr Olalere shared with The Globe – said the organization would not provide a loan following a “holistic assessment”. The message did not explain why the application was rejected and did not provide an opportunity for appeal. Instead, the message encouraged him to consult a list of black business organizations he could turn to for advice.
He said it was frustrating to wait for months and then not find out why he was rejected. “Everything is so shrouded in mystery,” said Mr. Olalere.
Yasmine Abdelfadel, a spokesperson for FACE, said loan applicants can raise concerns about their files with the organization’s escalation manager.
She said FACE’s credit rating committee, which decides on credit applications, is also willing to review some files.
Alice Hansen, spokesman for Small Business Secretary Mary Ng, said the appeals process was a recommendation from government officials. Ms Hansen said that while FACE was initially overwhelmed by the thousands of applications it received, the organization has made strides in recent months to improve the applicant experience.
“It’s very different now than it was a year ago,” she says.
The documents also provide more information about FACE’s growing budget.
As The Globe previously reported, the Black Entrepreneurship Loan Fund was initially supposed to be managed by FACE along with Canada’s Big Six banks, but they eventually abandoned the project before it launched.
Under the dues agreements, FACE’s initial budget of $325,865 included hiring three staff members. That agreement was signed on February 17, 2021. Two weeks later, the organization said it could not meet the government’s timelines without a team of 20 employees and additional resources. The contract was amended and total funding rose to $2,497,700, of which $1,650,000 went to salaries and benefits.
FACE was awarded an additional $9 million in funding effective April 1 to continue operations through March 31, 2025.
The federal government has also awarded $92 million to 38 organizations that provide business coaching and mentorship to black entrepreneurs through the Ecosystem Fund.
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