Access to capital remains key challenge for Black-owned businesses

Jan 8, 2022

Access to capital, markets and networks are the three primary barriers to success for Black entrepreneurs, according to Jamiel Robinson. As the CEO of economic and business development organization Grand Rapids Area Black Businesses, Robinson’s main focus is to break down these barriers in the state’s second largest city. A key component of that work will come this spring when the organization plans to break ground on its new headquarters — known as District 2012 — at 2012 Eastern Ave. SE on the city’s south side. The building will also serve as an incubator for Black-owned businesses. Robinson recently discussed the ongoing capital challenges facing Black entrepreneurs who are seeking to grow companies. 

Are there any overarching trends you expect for small business owners in Grand Rapids in 2022?

Overall I still see a lot of growth capital or scaling capital available to small businesses right now. But in the African-American community, businesses are still trying to find a footing to be able to get a stronghold in the business community in Grand Rapids. Capital is still not as easy to access for Black entrepreneurs. 

There has been a huge surge of new businesses forming in 2021. Have you seen an increase in Black entrepreneurs getting their businesses started this past year as well? 

We’re definitely seeing businesses starting, and new LLCs are being formed. The majority of businesses forming in the Black community are those that have lower capital requirements to start — there have been a lot of mom-and-pop businesses and lifestyle businesses. Typically those are marginally low-profit businesses that are being started. There has definitely been an increase of businesses throughout the pandemic that have been launched during this time, but a lot of the businesses are relatively low revenue from a profit standpoint. 

Are there any local tools to increase access to capital in new ways for Black entrepreneurs?

Not in many new ways. In the last six years, there has definitely been an increase in the amount of Community Development Financial Institutions (CDFIs), which provide alternatives to traditional lending for those who may not be able to access traditional lending. But those typically come with a higher interest rate. 

Money is really cheap right now, but if you have to seek alternative forms of capital you’re still being charged more to access capital. So for the people who have been marginalized from being able to access capital traditionally, it’s still more expensive money. 

But there are some new efforts. A few financial institutions have put out different programs, such as Huntington Bank, which has a new Lift Local Business Program. If you get backed by the (Small Business Administration) for a loan, they have closing fees that can be a barrier for business owners.

Besides access to capital, what are the major barriers to Black entrepreneurs in getting their business off the ground in Grand Rapids?

The three things we work on and we say are the typical barriers is access to capital, markets and networks. Those are the real three things that impede success and growth long term in the Black business community. Access to markets is access to customers outside of the local community and getting into retailers across the state and country, getting those products and services in front of a wider potential customer base.

Access to networks is the people you know and the ability to get in a room you wouldn’t otherwise be able to get into. In the African-American community, a lot of our networks are flat, and we’re disconnected from some of these networks and markets. 

How does Grand Rapids Area Black Businesses work toward finding solutions to some of these barriers?

We’re looking to address these issues and help connect our disconnected population through GRABB and our new headquarters. We have a vast network and are looking to leverage our resources, knowledge and connectivity from Grand Rapids to get a stronger foothold and be able to access some of the prosperity that exists in our community.

Original post: https://mibiz.com/sections/small-business/access-to-capital-remains-key-challenge-for-black-owned-businesses