Goldman Sachs commits $500M focusing on minority owned small businesses

Goldman Sachs has committed to delivering $550 million to help fund small businesses and communities around the world. Margaret Anadu, Head of the Urban Investment Group at Goldman Sachs, joins Yahoo Finance’s On The Move panel to discuss.

Video Transcript

JULIE HYMAN: You're watching On The Move on Yahoo Finance. I'm Julie Hyman. We earlier spoke with the mayor of Newark, New Jersey, Ras Baraka, about getting loan money to where it's needed in various small businesses in his city. One of the constituents that he mentioned that is helping with those loans is Goldman Sachs.

And we are joined now by Margaret Anadu. She is head of Urban Investment of the Urban Investment Group at Goldman Sachs. Goldman Sachs, by the way, has committed $500 million to support small businesses and needs, has granted a number of loans and grants at this point. Margaret, it's good to see you. Thank you for joining us.

So tell me about this program. When did you begin as part of the-- I know you were doing this before. This is what you guys do. But specifically, as part of this pandemic response, what kind of businesses are you guys lending to? Where has the money gone?

MARGARET ANADU: Absolutely. So as you mentioned, we've been doing this for a long time. So these community development financial institutions that we're deploying our capital through are community lenders that we've been working with for over a decade through our 10,000 Small Businesses initiative. And it was really through that experience and history with these lenders that we knew they had the mission, and the expertise, and really the relationships and capacity to make loans in those underserved areas in the black and brown communities that we're all very focused on right now and really importantly, in this moment, target the smallest of businesses.

And so we are, gosh, we're seven or eight weeks into this program, and the majority of that capital has been lent. And the data we're-- we're seeing come back is really encouraging. So one of the things that's pretty noteworthy is if you look at the median employee count of the businesses that our community lenders have reached, it's three. These are small businesses.

These are, you know, the florist, the-- the tailor, the-- the barber, the hairdresser, the folks that, you know, we-- we heard about all the struggle and pain in being able to get these loans, because either they didn't have a banking relationship, or for many of these businesses just have simply never taken out a loan before or needed to. And so these lenders were able to reach many of these businesses, over 8,000 across the country.

And the other thing that's really compelling, in addition to just how small these businesses are, is where these businesses are. So our lenders, if you look at the deployment across the country, roughly 50% of that capital has gone to minority neighborhoods, like many of the ones you probably heard Mayor Baraka speak about.

And the other thing that's really great is we've also had really great penetration in poor neighborhoods, in low-income communities. So around the country, a third of the capital has been made to businesses who are employing people and providing services in these low-income neighborhoods that we also know have been disproportionately hit by the health impacts of this crisis.

JULIA LA ROCHE: Margaret, it's Julia La Roche. Thank you so much for joining us, and I have to give you all credit. You all were so far out ahead of this in getting the help to the small businesses, really having a pulse there. You brought up that the minority community has been disproportionately affected. And I do appreciate the transparency in your report, I'm looking at it now, and how you all are making sure that those folks were getting the loans.

I want to know, from your perspective, what was it that really moved the needle? What was it that worked for you all? Because when we look at the PPP, for example, we saw that minority-owned businesses were disproportionately left out.

MARGARET ANADU: Yeah. So we took a really data-driven approach to figure out exactly the right strategy. So we were able to survey thousands of businesses just a few weeks ago, and we saw that double-digit disparity for black-owned businesses, both in their ability to even apply. We saw for, you know, for black businesses relative to others, there was a 12% Delta. And we also saw, coincidentally, a 12% Delta in those black businesses that were able to apply, their ability to then get through the queue and really see that approval.

And so it's really an all-hands-on-deck approach. We, one, went to the places where we know there are, you know, significantly strong black small business communities, so places like Atlanta, New Orleans, Baltimore, here in New York City. And we partnered, you know, very locally with those public sector leaders to say, hey, this capital is for you. It is available. And whether you have a bank relationship or not, this is capital that can be helpful in this time.

And so, you know, you brought up Mayor Baraka in Newark. And, you know, we-- we were working directly with him. We said we said, mayor, we have this capital available. We want to serve these businesses. And within a relatively few days, we had dozens of businesses out of Newark, all of those businesses operating out of low-income communities.

And so it's really about the mission and drive of these lenders, right? This is not about their pandemic approach. These are mission-driven lenders in the normal course and just getting that message out locally with these public sector leaders.

ADAM SHAPIRO: Margaret, hi. It's Adam. Good to see you.

MARGARET ANADU: Hey.

ADAM SHAPIRO: I'm curious. There's so many alumni from Goldman Sachs in positions of power in Washington, DC, the Secretary of the Treasury to name just one of them. Mr. Solomon has to have access to these people. Is the government looking to Goldman since you've done this successfully, as Julia pointed out, PPP had so many failures, to pick up some-- some measures it could do to be more efficient with the disbursement of funds?

MARGARET ANADU: You know, I'm actually-- I'm glad you brought that up. Because the PPP, I think we're obviously all learning a lot about the way it's structured and the process, but I think one big takeaway for us at Goldman was that, when you're designing a program like PPP, where the whole intention is to really support these businesses, and stem the bleeding, and-- and be there in the time of need, the voices that you really need at the table are those small businesses.

And so one of things we're doing next month is we're launching what'll be the largest ever virtual fly-in on Capitol Hill, connecting our network of thousands of small businesses directly to their legislators to hear what's working and, you know, just as importantly, what's-- what's not working, and where they see the changes that need to be made in the next round of legislation, and how the reopening works, et cetera. And so we think it's going to be a great first step.

It's a long-term initiative. We're calling it Small Business Voices and just making sure that there's that, you know, direct dialogue so that these small businesses have, you know, quite frankly, all the same access and direct dialogue that's a place like Goldman Sachs does.

JULIE HYMAN: Margaret, when you're looking at these businesses who have tried to apply for loans and apply for funds, PPP came with a lot of strings attached and a lot of requirements, including that you have to hire people back, for example, if you let them go. When you're-- when Goldman is lending to distressed businesses right now, how do you ensure that they're going to be able to repay? Are you lending at lower rates than typical, for example, or offering them business consulting along with the loans?

MARGARET ANADU: Yeah. It's-- It's a great question because it's-- we're really in the first inning. So if you look at the PPP capital specifically, there was that time frame and need to rehire to get the forgiveness. So the amount of the capital that you used on payroll and a few other eligible expenses over eight weeks, businesses have the opportunity to not have to pay that back.

I think what we all realize in the time frame that's passed, even since the inception of the program, we're not talking about an eight-week event. You know, already businesses have been closed for much longer than that. And so what continuing loan capital would need to look like to not just support these businesses and their expenses over this period, it's about how do you reopen? How do you recover? And trying to figure out those issues in the context of not knowing exactly what our reopenings around the country are going to look like is difficult.

And so I think the-- the types of loan capital, the interest rates, the terms, I think a lot of that is going to depend, one, on what future legislation looks like, and-- and, two, what our reopenings around-- around the country look like. But I think we definitely know today, you know, PPP capital was a first step. It didn't work for all businesses. You know, all businesses are not going to benefit from that forgiveness component. And we know there's a long, long road ahead.

JULIA LA ROCHE: Margaret, one final question. You were talking about a long road ahead. You all did a survey toward the beginning of this, where about more than half of the small businesses felt like they couldn't operate beyond three months, I believe it was. Where do you think that now, based on what we've seen in terms of the federal stimulus, the work that you all have done, what are the challenges and opportunities ahead?

MARGARET ANADU: Yeah, so I think I'll actually touch on some additional data from the survey you referenced. There-- there are some bright spots around PPP capital. For those businesses who were actually able to apply, to get through that queue, and be approved, I think there's over 80% of those businesses felt like they would survive. And importantly, they felt like they could ultimately maintain the majority of their workforce.

So capital does make a difference. And for those businesses who were able to use the PPP capital to cover their rent and utilities and be able to continue to pay their workers, so they stay connected to those employers, it was beneficial. I think what we're seeing and we need to all really come together and figure out is what are we doing for those businesses that could not utilize PPP in this way. So, for example, the, you know, the restaurant that is still not open being able to utilize PPP and get that forgiveness is just not going to be an option.

And so the road ahead is-- is mixed. There are some businesses that have been served. But I would say even for those businesses and the businesses who do not receive PPP capital, there's-- there's still a lot more work to do.

And to be quite frank, there can't be perfect clarity around the capital needs of those businesses before we go further into this crisis again. I really have to state, when we were even in the design of the program, that focus on eight weeks feels obviously short at this point in time, given that we've-- we've been closed already for much longer.

JULIE HYMAN: Yes, this is all gone longer, I think, than many of us, If not most of us, anticipated. Margaret, it's great to get some time with you. Hopefully, we can check back in with you a couple of months from now to figure out how all of this is going. Margaret Anadu is the head of the Urban Investment Group at Goldman Sachs. Thanks again. And we'll be right back.