JPMorgan Chase said Friday it's going nationwide with a program to increase credit access for small businesses in majority-minority neighborhoods.
Under the program, small-business applicants who previously may not have been approved for a loan are more likely to get an OK, and borrowers who received higher interest rates have a better chance of qualifying for a cheaper loan.
During the program's pilot phase earlier this year, the bank said that for small-business loans, it reduced the gap in loan-approval rates between majority-white areas and majority-minority areas from 11% to between 2% and 3%.
Banks and other lenders have revived special-purpose credit programs as a way to expand credit to historically underserved groups since protests stemming from the death of George Floyd in 2020 prompted them to reexamine their services for minority customers.
Special-purpose credit programs were legalized by the Equal Credit Opportunity Act, a federal law that prohibits lenders from denying access to credit for any reason other than the ability to repay. Previously, some lenders harbored concerns that special-purpose credit programs created fair-lending violations.
But in February, regulators
Other big banks have also taken a renewed interest in special-purpose credit programs since 2020, largely in the mortgage space. Wells Fargo this spring set aside $150 million to help lower interest rates on mortgages for Black customers. Over the summer, Bank of America said it would begin a trial program that offers mortgages to certain customers without closing costs or down payments. TD Bank now offers a mortgage product to Black and Hispanic borrowers that requires just $500 of the borrower's own funds.
JPMorgan introduced a special-purpose credit program in its mortgage business in 2021. It includes $5,000 grants to buyers of homes located in designated areas. The funds can be used to cover down-payment costs or closing costs or to buy mortgage points to lower a borrower's mortgage rate. Earlier this month, the company expanded the homebuyer grant program nationwide.
JPMorgan first piloted the small-business program earlier this year in four cities: Dallas, Houston, Detroit and Miami. In July, JPMorgan expanded the program to 21 cities and then extended it nationwide in late October.
The bank's plan to widen credit access includes "being responsible with how we refer people to credit," Ben Walter, CEO of JPMorgan's business banking unit, said in an interview.
"Making a loan to someone who can't pay it back isn't helping," Walter said.
JPMorgan said it intends to make Chase credit cards available for small-business customers through the program next year. The credit cards will allow customers credit for charges under $10,000, the current minimum loan amount in the special-purpose credit program for small businesses.
JPMorgan has also launched a digital loan application that removes the need for customers to visit a branch to apply for a business line of credit. And the bank has expanded its network of business consultants who provide free coaching to and advice to minority business owners.
