The collapse of Silicon Valley Bank on March 10 has prompted venture capitalists, nonprofit leaders, and immigrant founders to raise fresh concerns about lending discrimination and unequal access to capital for minority entrepreneurs, who say SVB was among the few large financial institutions willing to serve them.
SVB collapse renews concerns about capital access for minority entrepreneurs
The collapse of Silicon Valley Bank on March 10 has prompted venture capitalists, nonprofit leaders, and immigrant founders to raise fresh concerns about lending discrimination and unequal access to capital for minority entrepreneurs, who say SVB was among the few large financial institutions willing to serve them.
SVB, established in 1983, was the 16th largest bank in the United States at the end of 2022, according to the article. The California-based lender provided banking services to nearly half of all venture-backed technology and life-sciences companies in the country before it failed.
Data from the Small Business Credit Survey — a collaboration of all 12 Federal Reserve banks — shows that in 2021, approximately 16% of Black-led companies obtained the full amount of business financing they sought from banks, compared with 35% of White-owned companies.
Arlan Hamilton, the 43-year-old founder and managing partner of venture capital fund Backstage Capital, said she stepped in to help founders of color who panicked about losing payroll access during the bank run. Hamilton said SVB regularly sponsored conferences and networking events for minority entrepreneurs and was known for funding the annual State of Black Venture Report, spearheaded by BLK VC, a nonprofit that connects and empowers Black investors.
Many women, people of color, and immigrants said they turn to community and regional banks rather than the four largest U.S. banks — JPMorgan Chase, Bank of America, Wells Fargo, and Citibank — because they are frequently rejected by those institutions. Asya Bradley, an immigrant founder of multiple tech companies including Kinley, said she could open a business account at one of the top four banks only after her brother co-signed for her.
Black-owned banks represent one alternative, but their resources are limited compared with larger institutions. OneUnited Bank, described as the largest Black-owned bank in the United States, manages just over $650 million in assets, while JPMorgan Chase manages $3.7 trillion in assets.
Following SVB's collapse, Bradley said she joined a WhatsApp group of more than 1,000 immigrant business founders who mobilized to share information about alternative banking options, including regional banks that had offered to open accounts for former SVB customers.
- The source does not state how much total financing SVB provided specifically to minority-owned businesses.
- The source does not state whether federal regulators have opened any investigation into lending discrimination at major banks in connection with SVB's collapse.
- The source does not state what alternative banking arrangements, if any, the minority founders who used SVB have since established.
- The source does not state the total assets under management or portfolio value of Backstage Capital beyond the number of companies in its portfolio.
- The source does not indicate when the Small Business Credit Survey data cited was collected or published beyond the reference year of 2021.
- Bank of America and Citibank, two of the four banks named by Bradley as rejecting minority customers, are not quoted or given an opportunity to respond, though the source notes none of the top four banks provided a comment to CNN.