Scaling Lending to Entrepreneurs of Color: Part I

As the Biden administration settles into office amid the ongoing COVID pandemic, there continues to be tremendous concern among policymakers, corporate leaders and philanthropists about the financial health of U.S. small businesses — especially the smallest ones. Meanwhile, we are still very much in the throes of a racial reckoning, with the pandemic further laying bare the economic fragility of households of color and the deep racial inequities that continue to plague our country. Because business ownership has been a means for many Americans to build wealth, providing loans and grants to diverse entrepreneurs has been seen by many as an important way to address the racial wealth gap.1 Corporate America’s response to the current crisis has included several initiatives aimed at making more small business loans to entrepreneurs of color, primarily working through community development financial institutions (CDFIs). American Express, Citi, Costco, Google, JPMorgan Chase, Netflix, Square, Twitter, and Wells Fargo, among others, have recently made or announced plans to make large investments in funds designed to get capital to diverse entrepreneurs. The Biden administration, too, has placed a high priority on driving capital to small businesses owned by and employing people of color.