ImpactAlpha, February 9 — A record 10 million Americans applied to start new businesses over the past two years, as President Biden highlighted in his State of the Union address this week. “Ten million,” he repeated for emphasis. “And by the way, every time someone starts a small business, it’s an act of hope.”
Black Americans, especially Black women, have been the fastest-growing demographic of entrepreneurs. For this promising trend to become a durable driver of economic mobility, Black business owners need access to capital, technical assistance and bankers that understand their needs.
The McKinsey Institute for Black Economic Mobility identified business ownership as one of eight key pillars.
The McKinsey report suggests impact investors can invest in community development financial institutions and other lenders that provide “affordable, responsible financing to women- or minority-owned small businesses that struggle to obtain financing through traditional sources.” Another solution: Commit funding to companies that provide technical assistance, financial counseling, and loan application assistance to help founders “build knowledge and access capital to scale their businesses.”
Advancing Black business ownership via employee ownership transition structures can help increase job security for Black workers.
Biden thanked Vice President Kamala Harris for leading efforts to ensure small businesses have access to capital. Harris led the effort to secure an $8.7 billion investment package in December 2021 for community development financial institutions, or CDFIs, and minority depository institutions.
Nearly half of Black-owned businesses closed down during the pandemic, compared to 17% of white-owned businesses, mainly due to a lack of capital to cushion losses from the pandemic.
“What happens for communities of color is they actually do what they have to do to survive,” Living Cities’ Demetric Duckett said on ImpactAlpha’s Impact Briefing podcast last month. “So our question is: How are we actually supporting these new demographics as the country shifts, including in moments like the pandemic?