For Black-Owned Businesses, Access To Capital Is Starting Point To Leveling Field

By Ivey DeJesus

WWR Article Summary (tl;dr) Black-owned businesses have suffered a heavy toll during the pandemic. Data reveals that the fallout from the economic downturn has been harsh, with higher rates of forced closures and defaults for Black-owned businesses. So what can be done to create change? Ivey DeJesus reports.


For Black-owned businesses to begin to dismantle the historical disparities that have placed them at a disadvantage, they need better access to capital.

That’s the consensus among Black business owners and elected officials, and advocates.

As a starting point, access to money to do business is paramount.

“The difference between a man or woman who is an amazing neighborhood chef, the difference between them selling platters on a Friday or Saturday and owning a restaurant is access to capital,” said Rep. Jordan Harris, a Democrat from Philadelphia and member of the Pennsylvania Legislative Black Caucus. “Those resources need to be made available to folks so they can do what they are capable of doing.”

For the past two weeks, PennLive has showcased a myriad of Black-owned businesses and the challenges those businesses have had in the face of the pandemic.

The series - Black-owned businesses: Stories of struggle and success - was driven by the stark data showing the disproportionate toll that Black-owned businesses have taken from the pandemic. Black-owned businesses have seen higher rates of forced closures, defaults and fallout from the economic downturn.

To end the series, we turn to stakeholders to explore ongoing and additional steps to address long-entrenched systems.

Public funding While the days of blatant systemic racist practices among banks and lending institutions may be a thing of the past, Black business leaders say the legacy of those practices - redlining, predatory lending and disproportionately higher rates of interest and loan rejections - continue to impede Black businesses.

Many say aggressive public policy and public funding must play a role in dismantling those entrenched and systemic practices.

“Even before the pandemic many of these businesses were struggling primarily because they lacked access to capital and lacked any real attention to fight through some of the barriers that are systemic to them,” said Rep. Jake Wheatley, a Democrat from Pittsburgh and member of the Legislative Black Caucus. “I‘ve stated all along that we have to put particular focus on raising them up not just relief but as we move forward, how do we make sure we level the playing field.”

Wheatley is among several Democrats who want to create a business loan program that would target a considerable amount of money to help minority owned businesses. The plan earmarks as much as $1 billion to boost small minority-owned businesses beyond relief and recovery.

“It’s not that I‘m not happy about the CARES Act relief money,” Wheatley said. “We felt there should be a $10 billion dollar pot for all business owners and some focus on disadvantaged businesses not just to recover but to level up the playing field.”

The proposal has been put on hold in the wake of the Wolf administration’s release last month of the COVID-19 Relief Statewide Small Business Assistance program, which is intended to help businesses recover losses from the pandemic.

The grant program earmarks $100 million to help historically disadvantaged businesses. Funding for the program comes from the state’s allotment of federal CARES Act. The program is being rolled out in phases and is administered by the state’s 17 Community Development Financial Institutions.

Stakeholders in that program say the parameters of the funding is important because it targets the very business sector largely shut out of the federal pandemic relief program. Black-owned businesses were for the most part left out of that relief as a result of a complex business paradigm: It turns out that banks, which disbursed the funds, primarily dealt with existing clients.

Black-owned businesses historically have had poor relationships with banks and lending institutions.

“The program prioritizes businesses owned by people of color,” said Daniel Betancourt, president and CEO of Community First Fund, one of the groups administering the state program.

“The priority is to reach those business owners and focus on reaching historically disadvantaged business owners who typically won’t get these grants and loans. That’s one huge advantage.”

An added benefit of the program is that organizations such as the one Betancourt heads have existing relationships with minority-owned businesses.

Moreover, since Black-owned businesses are overwhelmingly start-ups or “mom and pop shops” that do not have the advantage of networking and even generational legacy, it was crucial that the program, unlike the federal funding, did not present a cumbersome application process.

“We made it simple,” Betancourt said. “People only needed a one-year tax return. It did not provide too many barriers in complexity. It is something that many small business owners could do on their own.”

The demand for the funding is so great, Betancourt fears the program will run out of money prematurely.

In addition to the state program, a slew of funding opportunities targeted at historically disadvantaged businesses have been spearheaded by cities and non-profits, including programs such as Impact Harrisburg and municipal grant and loan opportunities administered by cities like York, Lancaster and Reading.

Change the culture Yet, even before systemic hurdles can be addressed, the problem needs to be acknowledged.

“The first thing we have to do is be cognizant of what it is,” Harris said. “It’s systemic racism. Systemic racism has hindered development and support for Black businesses.”

Too often, he said, a select few successful Black-owned businesses are propped up to make the argument that the playing field is leveled and anyone can succeed if they work hard enough.

“We look at the exceptions and try to make them the rule,” Harris said. Leland Nelson, co-Founder of Dirty Dog Hauling and president of the African American Chamber of Commerce of Central Pennsylvania, cautions that, despite progress, deep cultural changes in the business world are crucial to dismantling systemic structures that have set Black entrepreneurs back for generations.

“It’s been engineered so well that we won’t get out of it quickly,” he said. “We didn’t get into it quickly and we won’t get out of it quickly.”

Nelson offers up the practice of redlining, which for decades drove discriminatory lending practices that shut out generations of Black families and businesses from getting home mortgages or loans. Redlining may be illegal now, but attitudes remain deep rooted, he said.

“There’s a whole economy built around the idea of keeping certain demographics at the bottom of the totem pole,” said Nelson, who shared his own experience with a bank that initially denied him a small loan, for which he was qualified.

“That’s systemic,” he said. “I had to call a lawyer and engage his services. So imagine if it can happen to me... it can happen to almost anyone.”

More engagement from businesses Nelson said the business sector must re-examine how it engages with Black entrepreneurs up and down supply chains.

Too often, he said, he has met potential business partners at conventions and events, but the interest shown while shaking hands and exchanging business cards eventually drops precipitously afterwards.

“I call it professional ghosting,” Nelson said. “I live it every day. You do what’s comfortable. If I’m not golfing with you, if I’m not your cigar buddy or your scotch buddy, I’m never going to see that contract.”

Better banking laws Betancourt calls for a strengthening of laws that would require banks to invest in low income areas. The Trump administration has, in fact, weakened those laws, starting with the Federal Reserve Bank.

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