After Noemi Prado devoted 29 years to working for Southwest Moulding in Grand Prairie, TX, the owners decided to close the business. But Ms. Prado gathered her retirement savings and other financing to purchase the company, a transaction that has sustained and created jobs for 40 people in her community.
A key aspect of the financing was a $825,000 loan that she received from theValley Economic Development Corporation’s (VEDC), a non-profit organization that provides affordable business assistance services, direct financial assistance, and entrepreneurial training to minority businesses and entrepreneurs. “If it wasn’t for VEDC, it wouldn’t have happened,” Ms. Prado said, noting that it was difficult to obtain traditional bank financing.
Data collected by the Association for Enterprise Opportunity (AEO) shows that a large percentage of people want to be like Ms. Prado and run their own businesses. At the same time, however, many would-be entrepreneurs lack the access to mentors, capital and support networks that could help them get up and running.
That’s the problem our nation faces.
Small businesses are actually creating a higher percentage of new jobs than big companies, but entrepreneurs and small business owners struggle to get the access to capital and the knowledge, known as ‘trusted guidance’ in the microbusiness industry, that they need to start or sustain their businesses. The reality is that significant barriers limit opportunities for business owners of color. They face discrimination in the banking world, have fewer wealth assets, and often lack the technical skills to make their dreams and aspirations come true.
Yet, there have been new developments that are slowly changing the landscape for minority entrepreneurs and small business owners.
Perhaps the most powerful is the changing demographics of the country, which corporate and government leaders are starting to better understand. The nation is moving towards a majority-minority status. Already, the majority of children born in the country are children of color. Thus, it’s clear that the nation must become more inclusive with business opportunities or the pockets of poverty across the country will just grow larger. And, smart corporate leaders recognize that the growing communities of color are where future growth and expansions of their businesses should concentrate for sustained growth.
Certainly, part of the answer lies with Community Development Financial Institutions (CDFIs), which are getting more attention than ever before from both the public and private sectors. These mission-based organizations, which receive federal resources to invest in disadvantaged communities, are frequently where minority business owners turn when they need financing. But needless to say, the demand frequently outpaces their money supply.
One of the positives is the collaborations now taking place between major banking institutions and CDFIs and other organizations, such as VEDC.
For instance, this year JPMorgan Chase & Co. announced a Small Business Forward initiative, which will allocate $30 million over five years towards growing local, community-based small businesses. The program includes a combination of targeted lending to minority-owned businesses, innovative community development financing and technical assistance for entrepreneurs. Through this work, JPMorgan Chase is helping minority- and community-based small business owners become engines of job growth and economic vitality in the neighborhoods they serve.
At a recent event in Washington, DC that AEO co-sponsored with JP Morgan Chase, Janis Bowdler, their Head of Community Development for Global Philanthropy, put the institution’s thinking in perspective. “As the economy recovers, much of the growth is often channeled toward reviving commercial corridors and downtowns in U.S. cities,” she said. “As a result, many disadvantaged neighborhoods, where underserved people live, are being left behind.”
Working with JPMorgan Chase, VEDC has created a National African American Small Business Loan Fund that will boost economic opportunity for minority-owned businesses and help them serve low-wealth communities by providing them with greater access to capital, technical assistance and financial consulting. VEDC is a member AEO, which is a trade association for the microbusiness industry.
A broad range of organizations are recognizing the power of “inclusive entrepreneurship,” which will help bring equity to communities and Main Streets across the nation. The National Coalition of 100 Black Women and New Economics for Women partnered with AEO and JPMorgan Chase to celebrate minority business owners at the event in Washington, DC during the annual meetings of the Black and Hispanic Caucus Conventions. Speakers specifically noted that minority women often need assistance in starting and running businesses, but frequently are unaware of how to get that help.
Clearly, various partnerships and collaborations can help minorities overcome the barriers. Empowered mission-based community lenders are working with underserved entrepreneurs to help them build and sustain businesses that can fuel financial and social mobility, and create jobs that are boosting the economy — locally and nationally.
We must make supporting entrepreneurs and small businesses a national priority.
Ms. Evans is president and CEO of Association for Enterprise Opportunity (AEO), the voice of microbusiness in the United States.