AEO spoke to two inspiring people working with African American business owners in underserved communities.
- Jessica Norwood is the founder and executive director of Emerging ChangeMakers Network, which focuses on economic empowerment and wealth creation in the Deep South.
- Kevin Jones is founder of Good Capital (among his many projects), a venture capital firm that invests in social enterprises.
Jessica and Kevin are collaborating on an initiative called The Runway Project, which accelerates the flow of pre-seed, friends and family capital into underserved communities by facilitating conversations between investors and small business owners of color.
AEO chatted with them about the reality of access to capital for business owners of color, the importance of Project CUE, and their advice for small business owners in underserved communities.
How is access to capital different for business owners of color?
Jessica Norwood: Access to capital cannot be separated from access to collateral and wealth- building. African Americans have [on average] $11,000 in assets and whites have about $144,000. Most of that wealth comes from a combination of home ownership, job income, and savings and retirement accounts. Add in subprime loans, bank redlining (the practice in which banks do not lend to minority communities), pay inequality, and you have a huge problem when it comes to wealth-building for African Americans. It impacts access to capital.
Kevin Jones: In general, impact investors, those intentionally vying to create a better world, are putting much more of their resources toward Africa and entrepreneurs working in Africa than toward African Americans. Something is stopping that from happening. That’s a question I keep asking impact investors: why is this happening or not happening?
What’s the biggest misconception about people in the low-income tax bracket in terms of starting a business and access to capital?
JN: When we talk about helping African American business owners overcome the hurdles around capital, the conversation awkwardly turns to one where the business owner is perceived to be akin to a welfare recipient. It surprises me because I don’t know any business owner who doesn’t take their business seriously.
KJ: Recent studies show that low-income people use their money well. They provide for their families as well as they are able, on average. There are also questions I hear from impact investors asking if they can get market rate returns investing in African American businesses.
Why is it important to have a service that connects business owners who’ve been declined for credit by a bank with CDFIs?
JN: Streamlining the arduous process for business owners is a step that will help them grow.
It’s also important for CDFIs to have help in finding deals. Often, the costs for finding and developing loans, because of the high-touch nature of CDFI loans, can be expensive. Project CUE will reduce some of the costs, which can help the financial crunch that many CDFIs face, particularly the smaller, more regional funds.
KJ: Access to capital is key, and people of color get turned down for loans that white people would get, often. So a source of capital that proactively looks for those entrepreneurs and micro businesses that need expansion capital is a key missing piece of infrastructure.
What advice would you give a person of color starting a business?
JN: If there are ways that your business can collaborate, do that. Share an office space, share a receptionist, and if there are ways you can merge or simply go in together for a bid, do it.
KJ: Learn to be at home in two worlds: the community you work with and the culture that has both investment and philanthropic dollars. Know your audience. Position yourself as someone who’s overcoming dependencies and who pulls up his/her bootstraps to investors, but [also] speak the language of local customers and partners.