Owners of Brooklyn Nets, Joe Tsai and Clara Wu Tsai have announced that they are working on the next steps on their plan to provide financial aid to minority communities.
The couple, last year, established a foundation, the Tsai Foundation Social Justice Fund, aimed to fight economic inequality in Black communities.
Economic freedom has historically been more difficult to achieve for people of color and the Joe and Clara Tsai Foundation is coming to the rescue.
The couple, through their foundation, has created a new program called “EXCELerate” which caters to business owners with credit scores below 620.
However, applicants will be judged based on character, not credit scores. What this means is that business owners will require good references to secure their loan, rather than just high credit scores. That reference can be a religious leader, another business owner, or a noteworthy person in the community who can testify to the business owner's character.
The practice of distributing loans based on just credit scores has denied funding access to a lot of small black-owned business owners as they are more likely to have lower credit scores than their white counterparts.
Credit scores can be affected by financial challenges unrelated to one’s potential as a business owner - like debt from a medical emergency.
There are two loan types in the EXCELerate programs :
1. The “rapid recovery” loan, which offers immediate funds of up to $15,000 and no interest attached. this category is for businesses that stayed open during the pandemic but need capital for new equipment, renovations, rent, or leases.
2. The “restart” loan, which is aimed at business owners who were forced to temporarily close or reduce working hours due to the pandemic.
Well-referenced applicants can apply for loans of up to $100,000 at a 2% interest rate to help restart and stabilize operations, and repayments depend on the success of the businesses. When money from the program is repaid, it is recycled and becomes eligible for new loans. The interest gotten from the loans will be used to pay for administration costs.
A statement by the owner, Clara Wu Tsai, reads, "We know that there is no social justice without economic opportunity, which is why we are so excited to launch the Brooklyn EXCELerate Loan Program aimed at elevating Brooklyn’s BIPOC [Black, indigenous, and other people of color] business owners post-pandemic and doing our small part to overcome barriers this community faces in accessing capital."
The statement employed statistics from the National Bureau of Economic Research, which reveals that Black-owned businesses went down by 41% during the earlier stages of the pandemic, compared to only about 17% of white-owned businesses. It also states that this loan program “seeks to address the obstacles within capital markets that create unfair hurdles for these entrepreneurs.”
Applicants will require references from local community members, and loans will not require collateral or guarantor.
Former commissioner of the New York Department of Small Business Services, Greg Bishop, has been appointed to serve as executive director of the fund.
“If you need to get a loan, you need to have a good credit score, you need to have collateral, and/or you need to have a guarantor,” Bishop said in an interview with the Daily News.
“We have stats that show (that) almost half of Black Americans have a credit score that’s under 620, and that means that it automatically excludes them from the traditional capital market.
As the city comes back from the pandemic, we have an opportunity to do it better than we did before, to address some of the longstanding barriers preventing the accumulation of Black wealth and ensure that everyone can equally benefit from the capital that is coming into our city anew."
In an interview last year just after the death of George Floyd, Wu Tsai discussed developing a five-point plan to enhance social and economic equality.
“You have to admit that racism exists, and you have to understand that there are systemic imbalances in society that cause racism and cause lack of economic mobility and lack of wage trajectory,” said Wu Tsai.
So far, contributions from the Nets to combat social issues amount to $60 million - this includes $10 million donated toward the National Basketball Association’s $300 million pledge to start the “NBA Foundation.”
Tsai and Wu Tsai purchased a majority stake in the Nets in 2019 for $2.35 billion after buying an initial share in 2017.