More than a credit score: How a Black-owned bank could widen support for small businesses

Jamie Smith Hopkins
Special to USA TODAY

This is part three of a five-part story published in partnership with the Center for Public Integrity and Word In Black.

ReShonda Young talks with business owner Rosie Daniel of LuLit’s Hair Essence at Newton’s Paradise Cafe in Waterloo, Iowa, on Oct. 27, 2021.

WATERLOO, Iowa – The words were blunt: “No U.S. metro area has larger social and economic disparities along racial lines.” 

That was how the financial news site 24/7 Wall St. described this region in a 2018 article ranking it as the worst place in the country for Black Americans. 

It hit like a thunderclap in the Black community. Residents already knew there were problems – a report the year before called the region “still severely segregated,” and there were huge gaps in income and homeownership between whites and Blacks. But now they had the empirical ranking that showed Waterloo’s troubles didn’t merely mirror the country’s.

Joy Briscoe, talent acquisition specialist for the Waterloo school system and a leader in the Black community, thought back to her 1980s childhood in town and couldn’t say that things had improved.

One key economic measure, in fact, was getting worse. In 1950, despite the barriers erected by powerful people, the city’s Black homeownership rate was an impressive 68%, double the national figure for Black Americans and about the same as for white Waterloo residents.

Good industrial jobs and union leaders committed to racial equality made a difference, said Colin Gordon, a University of Iowa history professor whose students tracked the restrictive covenants in Waterloo.

Then many of those jobs disappeared. And the Black community, with less intergenerational wealth to draw on and homes devalued by redlining and other discriminatory practices, was the hardest hit.

Economic losses overtake civil rights gains

The Black homeownership numbers tell the story: 46% in 1990, 40% in 2010 and by the end of the last decade, 32% – the reverse of the economic situation at the start of the civil rights era.

ReShonda Young talks with business owner Rosie Daniel of LuLit’s Hair Essence at Newton’s Paradise Cafe in Waterloo, Iowa, on Oct. 27, 2021.

“For working class African-Americans in the urban north, economic losses (falling wages, unemployment, deindustrialization) overshadow most of the legal gains of the civil rights movement,” Gordon wrote in an email.

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That experience was threaded through Briscoe’s own family history. And now, the same month ReShonda Young was contemplating a bank, Briscoe and other local leaders, fired up about the 24/7 ranking, met to discuss another way to fight the wealth gap: starting a business accelerator that would support Black entrepreneurs with mentorship, training and other aid.

They needed someone to run it, someone with an entrepreneurial record, a habit of helping other business owners and the ability to build something new at high speed.

The answer seemed obvious to them. But would Young say yes?

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Support for small businesses links two missions

She already had plenty on her plate. But the mission fits well with hers. Young agreed.

“I was so happy,” said Briscoe, executive director and co-founder of the group, the 24/7 Black Leadership Advancement Consortium (24/7 BLAC). “It was really fate: The planets aligned. God was smiling on us. … We couldn’t have found a better person.”

By September 2020, the accelerator was running with a dozen business owners. Other cities in Iowa soon came calling, hoping to replicate it. 24/7 BLAC raised hundreds of thousands of dollars in grant funding to keep the accelerator and other efforts going as Young helped recruit more participants, led discussions and worked with the entrepreneurs on their challenges. 

Frequently, their biggest challenge was getting a loan.

Credit scores: a mirror and an anchor

Accelerator participant Rosie Daniel, owner of LuLit's Hair Essence, needed to replace the failing car she relied on to make deliveries of her hair restoration products.

She went to a local credit union where she banks to apply for a business auto loan in 2020. She said the lender, after assuring her he would verify her credit score without a “hard inquiry” that would ding it, told her it wasn’t high enough.

Then, in the parking lot afterward, she saw an alert on her phone that made her even more upset: It had been a hard inquiry. The credit score she’d been working to improve would go down for nothing.

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Daniel, who can’t wait to move her accounts to the Bank of Jabez, dialed Young on the spot. “Guess what just happened to me,” she said.

Young listened, feeling more certain with every story like this that banking had to change. Too often a credit score simply reflects the wealth gap – and helps maintain it. After delving into accelerator participants’ financials and understanding their risks and opportunities in a way no single number could convey, Young thought local banks could widen their lens for customers, “looking at them and their business holistically.”

ReShonda Young, left, talks with business owner Rosie Daniel of LuLit’s Hair Essence at Newton’s Paradise Cafe in Waterloo, Iowa.

She and other 24/7 BLAC representatives suggested this type of broader thinking – which some financial institutions already employ – in conversations with local bank CEOs, all white. Some agreed it was a good idea. Others weren’t receptive, Young said – their loan-approval process worked for them, and they didn’t seem interested in changing.

But she could see that Stacey Bentley, president and CEO of Community Bank & Trust, took the request to heart.

The two women knew each other from serving on local boards together, and Young tucked a thought away: Perhaps Bentley, who helped open Community in 1997, would be willing to offer advice to the Bank of Jabez.

You can hear a podcast about Young’s quest in the newest season of "The Heist." 

Jamie Smith Hopkins is a senior reporter and editor at the Center for Public Integrity, a nonprofit newsroom that investigates inequality. She can be reached at Follow her on Twitter at @jsmithhopkins.