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The administrators of the federal Black Entrepreneurship Loan Fund, which has turned down more than 85 per cent of applications so far, have not created a way for rejected applicants to seek an independent appeal of the decisions, despite that being part of the administrators’ contract with the federal government, documents show.

Ottawa announced the loan fund last May as a way to help Black business owners who require capital, which has been a long-standing barrier for some in the community. Entrepreneurs can apply for loans of between $25,000 and $250,000. The program is run by the Federation of African Canadian Economics (FACE), a coalition of five Black business organizations, with money provided by the federal government and the Business Development Bank of Canada. BDC has final approval of the loans.

More than 16,000 entrepreneurs have applied for loans, but few have received one. Since the fund launched, 1,176 applications have been reviewed and 173 applications approved by FACE and BDC, for a total value of $16-million in loans as of July 13. The total amount of available funding for loans is $160-million.

Entrepreneurs who were denied loans were supposed to have access to a “transparent” appeals system, according to the contribution agreement between FACE and the federal government, which was obtained by The Globe and Mail under access-to-information law.

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

However, that appeals system has never been set up. In fact, many Black entrepreneurs who have applied for the program and who have spoken to The Globe say either they have not received a decision, or they have been denied, without being given a reason why.

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

His application was denied in February. FACE’s short message – which Mr. Olalere shared with The Globe – said that, after a “holistic review,” the organization would not be issuing a loan. The message did not provide an explanation for why the application was denied or provide an option for an appeal. Instead, the message encouraged him to consult a list of Black business organizations he could go to for advice.

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

Yasmine Abdelfadel, a spokesperson for FACE, said loan applicants can take concerns about their files to the organization’s escalation manager.

She said FACE’s credit adjudication committee, which decides on loan applications, is also willing to revisit some files.

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

“It is quite different now than it was a year ago,” she said.

The documents also provide more information about FACE’s growing budget.

As The Globe has previously reported, the Black Entrepreneurship Loan Fund was initially to be administered by FACE together with Canada’s Big Six banks, but they ultimately left the project before it was launched.

According to the contribution agreements, FACE’s initial budget of $325,865 included hiring three staff members. That agreement was signed on Feb. 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 to salaries and benefits.

FACE was awarded a further $9-million of funding as of April 1 to see its operations through to March 31, 2025.

The federal government has also awarded $92-million to 38 organizations that provide business coaching and mentorship to Black entrepreneurs through the Ecosystem Fund.

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