RESHONDA YOUNG: I first started thinking about going into business for myself when I was like 20 years old.
It represented me being able to choose … and so that was important to me.
JAMIE SMITH HOPKINS, HOST: To ReShonda, running your own business isn’t only about making your own hours or picking your coworkers. It’s about building wealth.
RESHONDA YOUNG: You know, as I would see older people who worked and worked and worked, and for what purpose other than just working?
HOST: ReShonda wanted to do it differently.
RESHONDA YOUNG: There was always other things … on the side that I would hope to grow into something bigger.
HOST: So at 25, she started buying investment properties to rent out.
Over the years, she built on that by helping to manage her dad’s contracting business. And she even briefly had a recording studio, though that ultimately didn’t work out.
The ups and downs of small business ownership didn’t scare ReShonda. She wasn’t afraid of the hard work, the long hours or the risks.
By 2013, ReShonda had three rental properties, strong credit and a track record of managerial success from her time at her dad’s company. She was ready for her next big move.
RESHONDA YOUNG: I just felt like I needed to be doing just something more with life. Like I felt like … maybe I wasn’t doing enough.
HOST: This is classic ReShonda. Always looking for a new challenge, a new opportunity.
One day, on a road trip with her mother, ReShonda had an idea. She had been thinking a lot about Waterloo in the 1950s and ’60s, when the city had boasted a thriving Black business scene.
And the two of them got to talking, reminiscing about all the things that had changed in their town over the years.
RESHONDA YOUNG: We were talking about, you know, just fun things from the past and things that we used to have here that we don’t have anymore.
And, there used to be a popcorn place … everybody absolutely loved. … And when we get home that night, I am still just like pondering on what am I supposed to do? … And I was like, “Oh yeah, we talked about popcorn. I really like popcorn.” And so I started the process online that night and just kind of went from there.
HOST: She opened her shop on Waterloo’s east side the next year. And she went big. Her store made 50 different flavors of popcorn. Everything from movie butter to salted caramel. They even had dill pickle and pizza flavors.
RESHONDA YOUNG: It was super exciting. We had built a lot of media attention around it. And so our opening day, we were flooded with customers. … And when people came into the store, they were really impressed with the look of it, and it did not look like a mom and pop shop at all, which was what I was aiming for.
HOST: The store featured gleaming new machines and friendly service. But according to ReShonda, the real star was a custom purple and white ceiling that made the whole store, well, pop.
Business boomed. And ReShonda soon started planning other locations.
RESHONDA YOUNG: I didn’t want people to think, “Oh, this is just ReShonda’s, you know, little popcorn store.” I want it to look like something, like, bigger than me. Like not even me, necessarily.
HOST: Again, classic ReShonda.
She started getting calls from people who were interested in opening their own Popcorn Heavens. Franchise locations opened in six states, from North Carolina to California.
ReShonda’s dream was coming true. She even had a jingle.
[Popcorn Heaven jingle plays] Pop into Popcorn Heaven! Go to Popcorn Heaven! Don’t fight the temptation. Snacking’s not a sin. When you open up a bag, a basket, or a tin from the heaven you don’t have to die to get in …
HOST: But behind the scenes of Popcorn Heaven’s success, ReShonda was struggling …
I’m Jamie Smith Hopkins. And from the Center for Public Integrity and Transmitter Media, this is The Heist.
There’s a story we hear about America, about it being the land of opportunity. A place where no matter who you are or where you come from, you can build a better life for yourself. It’s the American Dream. The idea that with hard work and an entrepreneurial spirit, anyone can pull themselves up by their own bootstraps.
But the truth is, that dream is much harder to achieve for some than it is for others.
If you’ve got friends or family, for instance, who are able to invest in your business, you’ve got a real head start. But without that wealth in your community, most people have to turn to a bank.
Which is exactly what ReShonda did when she started Popcorn Heaven.
[BREAK]
When ReShonda was starting Popcorn Heaven, she applied for a business loan of $80,000 to cover costs like leasing a storefront and building out the interior. She put together a detailed business plan describing the product, her team, her market area, the profit she expected to make.
And she presented it all to a lender. At first, they seemed interested …
RESHONDA YOUNG: Everything was going great. And then … the conversations stop.
So she moved on to another bank. They said they would love to give her a loan … but only after she’d gotten the business off the ground.
RESHONDA YOUNG: They’re like, “Well, we think it’s a good idea, but maybe we’ll invest in you after you show us that it’s successful.” And I’m like, “You do realize that’s not going to happen, right?” Like, if you can’t do it now, then at that point, I probably won’t need you. So there was that.
HOST: Now, remember, one of ReShonda’s businesses — the recording studio — had gone bust after a business partnership went sour. And so she’d had to declare bankruptcy in 2005, which could explain some of the banks’ hesitancy about Popcorn Heaven. But ReShonda says they never even brought it up.
On top of that, eight years had passed and ReShonda’s finances had bounced back. Her credit score was fully recovered. Her rental properties were bringing in money. She felt like her popcorn idea was a good bet.
In the end, a third bank agreed with her … kind of. They gave her a loan but for a lot less than she’d asked for. Only $56,000 instead of 80.
RESHONDA YOUNG: It wasn’t for the amount that I actually needed, but it was enough to get the construction done.
HOST: Looking back, ReShonda says that discrepancy between what she asked for and what she got made a huge difference.
RESHONDA YOUNG: It just really showed me, I guess, how it’s so important to get everything that you need instead of starting a project, like, “OK, well, we’re gonna have to figure this out.” Because I knew that I was starting behind.
HOST: From the start, Popcorn Heaven was undercapitalized.
ReShonda was building on a shaky foundation. There was just no cushion for the normal ebbs and flows of doing business.
RESHONDA YOUNG: You know, even though those first couple of months we were knocking the numbers out of the ballpark, then come summer, things shift because people are vacationing, they’re out and about, and I was just constantly brainstorming and strategizing on, “OK, now how do I pivot? Now how do I get my numbers back up?” … It was like a do or die. You’ve got to do that. There’s a different level of stress when you’re having to chase money to make sure that things are OK.
HOST: But ReShonda was determined to find a way forward. She still had big plans for the business. Like a trailer. A mobile popcorn stand for taking her products to community events, sports games, wherever her customers were.
She applied for a new loan to finance the trailer, but she didn’t get the money. She felt like her only option was to work harder and keep trying to bootstrap it.
At some point, ReShonda was putting in 60-hour weeks just to manage Popcorn Heaven in Waterloo.
She was down to one location, now on the west side, but on top of that, she had a brand to think about. And franchises to support. Every detail of franchise management, down to the compliance of nutrition labels in different states — it all fell to ReShonda.
Franchisees paid her royalties for these efforts, but it was a lot for just one person. She wanted to hire someone to help out, but she couldn’t afford it.
RESHONDA YOUNG: If I would’ve had the extra money … I would be able to really just focus more on growing my store and the other businesses instead of stuck in the technical type of things that I was having to do. [Audio trails off]
HOST: It was unsustainable. Eventually, she realized that for the sake of her business, she had to make a choice: the store or the franchise.
RESHONDA YOUNG: Yeah, because of the undercapitalization, it did lead me to make the choice of … like, am I going to focus on growing the store and let these other things go by the wayside? Or am I going to sell this store and focus on making sure that everybody has what they need and that they’re successful with what they’re doing?
HOST: She chose to support her people. In 2017, she sold her last storefront. And what happened next would become a defining moment on her journey to the Bank of Jabez.
RESHONDA YOUNG: So I sold the Popcorn Heaven to a couple. It was a white female and a black male. Everything was in the name of the white female and, you know, I had learned that she was able to go to the same bank that I went to and was able to get twice as much money … for the exact same business from the exact same bank. …
When I heard about it … I was outwardly very calm but inside I’m just like, “You gotta be kidding me.” … Like, I was very frustrated.
HOST: The amount of a business loan, in many cases, isn’t made public. So we couldn’t find out if it was literally for twice as much, but I was able to confirm that ReShonda’s buyer got a significantly bigger loan for the same business from the same bank.
Maybe it makes sense. She was buying a business that was already proven. In some ways you could even see it as a testament to ReShonda’s success with Popcorn Heaven.
But the thing is: ReShonda believes the buyer’s loan wasn’t just for the store as is … but also for the popcorn trailer.
So after ReShonda put in all that work getting the store off the ground, fighting undercapitalization, struggling to expand … the buyer was able to get a loan to buy the store and grow the store, just like that.
RESHONDA YOUNG: So yeah, the business was worth more, but it seems like it was worth more in her hands than what it was in mine.
HOST: Now, we don’t know what exactly happened here. The bank says it can’t comment on individual transactions, and added that it’s an equal opportunity lender. But ReShonda saw it all as discrimination.
And actually, that lack of clarity plays a role in the wealth gap, too. Because many details about small business lending are completely hidden from public scrutiny.
Here’s what I mean by that: For home mortgages, the federal government makes banks report some information about each application they approve or deny. That includes the race of the applicants. Making that information public has allowed researchers and journalists to expose discriminatory practices. But that data doesn’t exist for business lending.
PAULINA GONZALEZ-BRITO: Banks do not have to track who they lend to. For instance, they don’t have to track by race or ethnicity. They don’t have to track by gender. And it’s not just banks, but all financial institutions. [Audio trails off]
HOST: That’s Paulina Gonzalez-Brito. They’re the executive director of the California Reinvestment Coalition. It’s a group that advocates for more financial services in low-income neighborhoods and communities of color. They say that tracking data on lending practices is the first step towards reducing the wealth gap.
PAULINA GONZALEZ-BRITO: Data is policy. We can make changes when we have that data, but we don’t have it right now. And so it just continues to perpetuate the harm and exclusion that our communities have faced for a long time.
HOST: Which is why it was such a big deal when Congress created the Consumer Financial Protection Bureau in 2010 and directed it to make a rule requiring lenders to track that data — and make it publicly available. But the agency didn’t follow through.
PAULINA GONZALEZ-BRITO: This rule that we’re all very excited about and think can do some really good things for lending to Black, Indigenous and people of color small businesses, the Trump administration just put a halt to it. … And so this meant that we weren’t going to get this data anytime soon, and communities were going to continue to suffer from the lack of investment.
And so we filed the lawsuit … against the Trump administration in 2019.
HOST: Their suit argued that the federal government had violated its own law by not making banks and other financial institutions report on their lending practices. In doing so, they said, the government was allowing discrimination to go unchecked.
But without the data, that claim was hard to prove. So Paulina’s organization looked for people with stories of lending discrimination.
RESHONDA YOUNG: I’m like, stories? Yes. I’ve got stories, and absolutely I’m interested. You know, I’ve been interested for years in doing something just to highlight what was going on.
HOST: In June of 2019, ReShonda joined the lawsuit. Alongside her was the owner of a small print and design shop in Oregon, as well as the National Association for Latino Community Asset Builders and, of course, the California Reinvestment Coalition.
Everyone had similar stories of struggling to get approved for business loans or receiving vague denials that discouraged them from reapplying. ReShonda told her story about selling Popcorn Heaven.
She says it felt good. And it opened her eyes to the scale of the problem. Suddenly, she could see that there were people like her all over the country — all of them held back by banks.
RESHONDA YOUNG: When I entered into all of this, like, there was so much more that I didn’t even realize. And the more that became uncovered, it was … just like that catalyst.
HOST: In February of 2020, ReShonda and her co-plaintiffs got an answer. The Consumer Financial Protection Bureau agreed to settle the suit and committed to a deadline for collecting data. Paulina says it was a rare achievement.
PAULINA GONZALEZ-BRITO: It felt really good, I have to say. You know, … often in this work, it takes a really long time to get a result that you want. And sometimes you don’t get the result you want at all. … So to be able to secure this victory was huge.
HOST: It felt huge to ReShonda, too. She thought maybe, finally, there’d be some progress.
But even though the case moved quickly, and the CFPB now has a strict timeline for making the rule, it’ll take years before the data is actually available. And even then, it’ll just be data: at most, more evidence of disparities, rather than a fix.
When ReShonda looked around, that’s what she saw a need for: actual fixes.
RESHONDA YOUNG: So with Bank of Jabez, the main thing is that it’s like, it’s the actual boots on the ground. … Like, that’s the thing that I see — and that the lawsuit addressed — is that there are laws on the books, but people just don’t follow them. And that’s the difference maker. …
To me, that’s a minimum. Like, the things that they want the institutions to do, it’s absolutely minimum.
HOST: Her mission for the bank was clear.
RESHONDA YOUNG: Like the people who are actually meeting with, you know, prospective homeowners and small business owners and whoever — the people who are actually meeting with them have to have a higher level of care, compassion and standards when it comes to equity.
HOST: A higher level of care, compassion and standards for equity.
To help other Black entrepreneurs make their dreams come true, to help Black businesses grow, to build wealth in the community and make some kind of dent in the wealth gap, ReShonda’s bank would have to be different. It would have to be better than many banks.
And it would have to be properly funded. To open the Bank of Jabez, ReShonda thinks she only needs to raise $3 million in investments. But she doesn’t want her bank to be undercapitalized. She wants it to be able to weather a storm, a recession, a burst real estate bubble. So she’s aiming for more than three times the minimum: $10 million to open the bank.
[BREAK]
HOST: I’m standing on an empty plot of land on the east side of Waterloo. It’s a full city block of patchy grass and big mounds of upturned dirt. Rodney Anderson — a local Black business owner — has a plan for this place.
RODNEY ANDERSON: You are looking at the foundation of where All-In Grocers will be.
HOST: Rodney is a friend of ReShonda’s. He was actually her landlord at her first Popcorn Heaven location. ReShonda says Rodney has a real passion for community development, especially on the east side of Waterloo.
His grocery store site is on the edge of a residential neighborhood, right off a major thoroughfare. There’s a CVS next door. And a car dealership around the corner. Rodney says that a grocery store is something the community really needs.
RODNEY ANDERSON: It hasn’t been a grocery store in this area of town in 30 to 35 years.
JAMIE SMITH HOPKINS (mostly inaudible): Wow.
RODNEY ANDERSON: Yes.
JAMIE SMITH HOPKINS: What’s the closest grocery store?
RODNEY ANDERSON: Two miles north. So this is considered a food desert.
HOST: Rodney says the site is poised to become a commercial hub. Not just a grocery store, but a restaurant, too. And a laundromat, a community center, jobs in one of the poorest neighborhoods in Waterloo.
RODNEY ANDERSON: We call it an economic oasis.
HOST: But as we were standing there in September of 2021, the plan was stuck somewhere between the food desert and the economic oasis. Rodney’s got approval from the City Council, and he’s invested hundreds of thousands of dollars of his own money, but this is a $9 million project. Getting a bank loan was proving to be a problem.
RODNEY ANDERSON: The biggest struggle was not getting a buy-in from community banks to understand what this neighborhood is all about. And what this side of town is all about. You know, so that was the biggest struggle. … We give them a call and they said, “Hey, we just couldn’t get comfortable with the structure.” They never said this section of town, but you could just tell it was more so, like, in the area. You know, to me and to our team, “the area” meant the northeast side of town, which is the east side of Waterloo where predominantly Black and brown people are at and live.
HOST: Rodney thinks that if the issue was really the financial structure, the banks would work with him to restructure it. But he said they didn’t.
In the meantime, people in the neighborhood are still traveling two miles to the nearest grocery store. They’re still waiting for the laundromat. And the money that could be circulating in the community is leaving instead.
RODNEY ANDERSON: So when you don’t have a grocery store, you don’t have a sit-down restaurant, when you don’t have a cleaners that’s respectable, you know, you’re going to take your money and you’re going over the bridge … leaving the community.
HOST: In theory, getting a business loan should be a straightforward process.
A person who needs money goes to the bank and asks for it. The bank then begins a process called underwriting. Which means they check out the applicant’s finances, their credit history, their plan for the money and how they’ll pay it back. The bank might consider their relationship with that person — do they seem like a good bet? And then they make a decision.
Basically the bank is weighing two things: risk and opportunity.
The risk is that the business flounders and the loan never gets repaid. But the opportunity is profit, which the banks make by charging interest.
Of course, the truth is, it’s not really that simple.
Bankers bring their own experiences, their own biases to the table when they’re deciding if something is a good opportunity. And even as banks introduce lending algorithms to reduce that subjectivity, bias often remains.
What Rodney sees as a neighborhood full of potential might look more like a risk to a bank that doesn’t know the area like he does.
And bias also shows up in the decisions about who banks decide to take a chance on.
PAULINA GONZALEZ-BRITO: There’s a standard for what is risky and what is not risky that the banks have institutionalized by, you know, requiring credit scores, or requiring collateral, or requiring a history of, you know, the revenue from your small business. And the way I think about those kinds of requirements is I think about them as underwriting to whiteness because it doesn’t take into account the history and the lack of intergenerational wealth and the reasons for that lack of intergenerational wealth.
HOST: That lack of intergenerational wealth is really important. Remember: Banks want to see that you have strong finances before they grant a loan. So they consider things like income, debt, the capital you have on hand, the assets you could put up as collateral … Paulina says that’s not fair to people who find themselves on the wrong side of a wealth gap built by discrimination.
PAULINA GONZALEZ-BRITO: We have less wealth. We weren’t able to pass on wealth from one generation to the next. And it means that now, when people try to borrow, they don’t have collateral for banks … or don’t have any equity in a home or anything else that can be used to help them access small business lending. And that’s a result of the historical discrimination that was institutionalized both by the U.S. government and banks.
HOST: Credit scores present a similar problem. You can see this really clearly through the example of community development financial institutions — the kind of bank ReShonda wants to open.
CDFIs have an explicit mission to do business with and lend to underserved communities, where credit scores are often lower.
So you might think that CDFIs would see a lot more loans that are never paid back. But that’s actually not the case. In fact, according to a 2017 study, their success rate is better than banks as a whole.
PAULINA GONZALEZ-BRITO: And so it just shows that it’s not that we’re higher risk. It’s that we are designated as higher risk.
HOST: And things don’t look any better when it comes to the emphasis on banking relationships. A 2019 study by the National Community Reinvestment Coalition found that lenders treated white testers who inquired about loans significantly better than they treated Black and Hispanic testers, even though the people of color were more qualified for loans. They got less information about the lending process, less follow-through.
And Paulina says that’s par for the course.
PAULINA GONZALEZ-BRITO: We’ve seen that Black, Indigenous, people of color are treated differently when they go into banks. This has been seen time and time again. You know, we’re asked for more information. … We’re not followed up with as much. We’re not given all the information we need. And that means that, you know, we’re less likely to have a small business that can withstand a crisis. We’re less likely to have a small business that, you know, can expand and grow.
HOST: All of that adds up not only to inequities in lending but also to a general mistrust of banks that leaves communities of color vulnerable to expensive alternatives. Like businesses that charge fees to cash a check.
PAULINA GONZALEZ-BRITO: Those check cashers have people working them who look like the community. They have a level of cultural competency that the banks don’t. And so that becomes a much more attractive place than a bank where you’re being asked about why you have cash to deposit. …
So it’s expensive, it’s expensive to be excluded from these banks. And it’s expensive to be treated the way that they’re treating people.
HOST: So when it comes to small business lending, Black applicants and other applicants of color are caught in a vicious cycle. Where less access to lending leads to less available wealth which leads to less access to lending, and on and on it goes.
And the thing is, federal regulations aimed at stopping lending discrimination are largely considered race neutral. Which means they tell lenders: Don’t consider race at all.
PAULINA GONZALEZ-BRITO: When I say race neutral, I mean, it’s not addressing the history of discrimination and racism, but what it really is, is continuing the same discrimination and racism. Because if you don’t change the status quo and all you’re doing is continuing to implement the current conditions, then those conditions have been created by discrimination and racism and redlining and the lack of access to capital and branches not being in our communities, all of that.
HOST: So, by not taking the history of discrimination into account, banks are allowing it to shape their lending practices. Which only makes the wealth gap wider. And that’s exactly why Paulina says ReShonda’s mission to open a Black bank has so much promise.
PAULINA GONZALEZ-BRITO: I’m really excited about that, and I’m excited for her and her resiliency and creativity around this. Because when we look around the banking sector, there’s very few Black-owned banks now. … So to have a small business owner push to open a Black-owned bank that serves her community much better than a bank that you know is exclusionary, you know, it’s just, that’s really exciting.
HOST: After years of funding struggles, Rodney Anderson finally secured a loan for his development in 2021. It was from a CDFI, actually. But it wasn’t anywhere nearby.
RODNEY ANDERSON: The financing that we have to go out and get is from Durham, North Carolina. From a place that haven’t even, excuse me, step foot into Iowa.
JAMIE SMITH HOPKINS: Through this whole process, was there something you learned about banking in Waterloo that you hadn’t known before?
RODNEY ANDERSON: That Waterloo is probably one of the least diverse lending institutes in the state that I’ve been working with. Because it wasn’t like it was just dollars and cents. Some people weren’t even calling us back, even though they had a great conversation going with us, they got our paperwork, they got our tax return, everything there. They just did not take the initiative to come back.
HOST: Rodney needed a higher level of care, compassion and standards for equity. Which is why, just like Paulina, he says he’s eager for ReShonda to open the Bank of Jabez.
RODNEY ANDERSON: I think that was a great idea because what she’s doing is, it’s going to coincide with what we’re doing. Because we can put — out of all these companies here, we can put money into her bank. To make it into our bank.
HOST: Because a bank like that could make a different calculation on risk. It could consider other kinds of opportunity. Like what ReShonda knew she had with Popcorn Heaven. Or what Rodney sees in his development. Or simply all the untapped potential of Waterloo’s east side.
Next week on The Heist: Which investors are willing to gamble on a new bank?
RESHONDA YOUNG: It’s money that’s at risk. You know, you may not get this money back. And so you’re going to have a lot of people that will shy away because of that. And I don’t blame them.
Yeah. I definitely don’t blame them for that.
[CREDITS]
HOST: This season of the Heist is hosted by me, Jamie Smith Hopkins, and brought to you by the Center for Public Integrity and Transmitter Media.
This episode was written and produced by Isabel Carter.
Sara Nics is Transmitter’s executive editor, with additional editing by Shoshi Shmuluvitz.
Wilson Sayre is our managing producer.
And Gretta Cohn is our executive producer
The Center for Public Integrity team is Jennifer LaFleur, Matt DeRienzo, Lisa Yanick Litwiller, Janeen Jones, Ashley Clarke and Alex Eichenstein.
Our fact checker is Peter Newbatt Smith.
Rick Kwan is our mix engineer.
Special thanks to Jordan Bailey and the National Community Reinvestment Coalition’s Brad Blower.