Ottawa black entrepreneurship loan applicants unable to appeal rejection despite promises of transparency

Administrators of the Federal Black Entrepreneurship Loan Fund, which has denied more than 85 percent of applications so far, have not created a way for rejected applicants to request an independent appeal of decisions, despite this being part of the managers’ contract with the federal government, documents show.

Ottawa announced the loan fund last May as a way to help black business owners who need capital, which has been a longstanding roadblock for some in the community. Entrepreneurs can apply for loans ranging from $25,000 to $250,000. The program is managed by the Federation of Canadian African Economics (FACE), a coalition of five Sudanese business organizations, with funds provided by the federal government and the Business Development Bank of Canada. BDC has received final approval for the loans.

More than 16,000 entrepreneurs have applied for loans, but only a few have received a single loan. Since the fund’s launch, 1,176 applications have been reviewed and 173 have been approved by FACE and BDC, totaling $16 million in loans as of July 13. The total funding available for loans is $160 million.

Entrepreneurs who were denied loans were supposed to have access to a “transparent” appeal system, according to a contribution agreement between FACE and the federal government, which The Globe and Mail obtained under the Access to Information Act.

“This process should provide a multi-step and independent review of the original decision,” the text of the agreement states.

However, this appeal system has not been established. In fact, many black entrepreneurs who applied for the program and who spoke to The Globe say they either did not receive a decision, or were rejected, without giving a reason.

Yumi Ollaleri, president of the Ontario College of Management and Technology, a private vocational college in Toronto, said he applied for the loan last year. He said he spent time and money compiling his application, which included a business plan, audited financial statements and personal tax records.

His application was rejected in February. The FACE short message – which Mr Olalere shared with The Globe – said that after a “thorough review” the organization would not issue a loan. The letter did not provide an explanation as to why the application was refused or an option to appeal. Instead, the letter encouraged him to refer to a list of black business organizations he could go to for advice.

He said it was frustrating to wait months and then not know why he refused. “Everything is shrouded in mystery,” Mr. Olalere said.

Yasmin Abdel-Fadil, a spokeswoman for FACE, said loan applicants can convey their concerns about their files to the organization’s Escalation Manager.

She said the FACE credit arbitration panel, which decides on loan applications, is also ready to reconsider some of the files.

Alice Hansen, a spokeswoman for Small Business Minister Mary Ng, said the appeal process was a recommendation from government officials. Ms Hansen said that while FACE was initially overwhelmed with the thousands of applications it received, the organization has made strides in recent months to improve the applicant experience.

“The situation is completely different now than it was a year ago,” she said.

The documentation also provides more information about FACE’s increased budget.

As previously reported by The Globe, the Black Entrepreneurship Loan Fund was initially to be managed by FACE along with the six largest banks in Canada, but they eventually left the project before it was launched.

According to the contribution agreements, the fund’s initial budget and certificate of expenditure of $325,865 included the hiring of three employees. This agreement was signed on February 17, 2021. Two weeks later, the organization said it could not meet the government’s timelines without a team of 20 employees and additional resources. The contract was amended and the total funding increased to $2,497,700, of which $1,650,000 went for salaries and benefits.

FACE was awarded an additional $9 million in funding effective April 1 to continue its operations through March 31, 2025.

The federal government also awarded $92 million to 38 organizations that provide business training and mentorship to black entrepreneurs through the Ecosystem Fund.

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