In an acknowledgement that many U.S. small businesses cannot qualify for a bank loan, a federal agency that assists minority-owned firms is now partnering with a pair of online lenders.
The Minority Business Development Agency, which is part of the Commerce Department, announced Wednesday a new agreement with Fundation Group, a New York-based online lender that specializes in small-business credit.
The agency's partnership follows a similar agreement with Funding Circle that took effect in December 2015. Funding Circle, which is based in London and runs its U.S. operations from San Francisco, also offers small-business loans over the Internet.
As part of the Fundation partnership, the federal agency's clients will have access to various educational resources to help them become better positioned to qualify for a loan. The agency does not steer clients toward any particular lender, but Fundation hopes that the relationship will result in a meaningful increase in loan applications.
"We feel like we can turn this into a very effective partnership," Fundation Chief Executive Sam Graziano said.
Banks continue to be an attractive source of credit for many small businesses, said Nicholas Perkins, business development strategist at the Minority Business Development Agency. But he also pointed out that a lot of businesses cannot get a loan from a bank.
So the Washington-based agency wants to make sure that business owners are aware that online lenders offer another potential option. "I think a lot of businesses around the country don't know about it," Perkins said.
The Minority Business Development Agency operates 38 business centers across the country, where minority business enterprises meet with staffers who advise them on how to grow their companies.
Fundation, which was founded in 2011, also has partnerships with Regions Financial in Birmingham, Ala., and the BancAlliance network of more than 200 small banks.