June 14, 2024
Some Red States Are Helping Citizens Save Money Despite Biden’s Agenda


Everett Sands’ 15-year-old twins have been hearing from their dad since age 10 about the importance of building credit. When they reach adulthood, they’ll have it ingrained in their consciousness.

But Sands, CEO of Lendistry, says that these kinds of anecdotal and generational conversations about financial fundamentals are not nearly as common in Black communities as among white families and friends. Black people have historically been shut out of tapping into capital that many white owners of businesses take for granted as a tool to help them grow their companies, preventing them from having the informal exchanges that help white people grow their financial acumen.

Much about this is changing for Black business owners as the public, private and philanthropic sectors have all been prioritizing the tools that Black people need to advance up the economic ladder and close the racial wealth gap. May is Small Business Month, and small businesses are at the heart of Black economic growth and building generational wealth.

The gross revenue of Black-owned firms has increased significantly in recent years, jumping 43 percent from an estimated $127.9 billion in 2017 to $183.3 billion in 2021. More than 161,000 Black-owned businesses employ more than 1.4 million people. The wealth gap – the difference between assets and debt – between white and Black households in the U.S. is 13 to 1, but shrinks to 3 to 1 among small business owners. “Small businesses and entrepreneurs become the anchors of so many communities,” said Donna Gambrell, CEO of Appalachian Community Capital, which provides financial services to historically underbanked communities.

Yet despite all this evidence of business ownership as an engine of economic mobility, only 13 percent of Black-owned and 20 percent of Latinx-owned businesses reported receiving the full share of financing requested from banks, compared to 40 percent for white-owned firms. Centuries of systemic racism mean that Black people have fewer assets to use as collateral for loans and fewer relationships with banks than white people, while contributing to bias in lending that continues to this day.

Community Development Financial Institutions (CDFIs), mission-driven lenders focused on serving historically underbanked communities, are playing a critical role in strengthening Black-owned businesses, which benefits the entire economy. Many CDFIs are specifically attuned to Black communities. They understand the unique challenges faced by Black entrepreneurs and work closely with them to provide loans, technical assistance, and other financial services. By partnering with CDFIs, Black-owned businesses can access capital, build credit, and receive personalized support.

Although minority-led CDFIs have six times less capital (6x less) than white-led CDFIs, initiatives such as the Black Renaissance Fund have emerged to address this gap. When Black-led CDFIs increase their balance sheets and capacity to lend funds, Black-owned businesses benefit.

“We take the time to get to yes,” said Gambrell, whose CDFI serves customers in 13 states. CDFIs have what she called a “high-touch” relationship with business owners, working diligently with them to gather the documentation and attain the credit scores they need to qualify for loans. And CDFI criteria are more flexible, using factors that traditional banks may not to help applicants qualify.

Sands of Lendistry said that for Black people historically denied loans, CDFIs are an essential alternative to predatory lenders, which charge exorbitant fees and interest rates that lock people into inescapable debt. CDFIs also have access to a range of options of which most customers are unaware. “A customer doesn’t always know what they need,” Sands said, adding that CDFIs work closely with business owners to arrive at the right sources of capital, which may include government-funded grants.

Health care and social assistance comprise the largest portion, 28%, of Black-owned businesses. Put differently, 7 percent of all U.S. businesses in those sectors are Black-owned. And both Gambrell and Sands said that Black business owners are increasingly becoming involved in clean energy initiatives, boosted by the government’s recent announcement of $1 billion in funding for climate projects for communities of color.

“When you have more diverse businesses in the ecosystem, it strengthens the small business net worth across the country,” Gambrell said. “People like the idea of taking a dream and making it a reality.”



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