Shavon Marley was working in sales while dreaming of starting a business in her hometown of Raleigh, North Carolina. Then in 2016 she was hit with a breast cancer diagnosis. Faced with a situation that might have derailed many others, Marley used it for fuel to turn her dream into reality. During long hours of treatment in a hyperbaric oxygen chamber, she ruminated on the trucking business she and her husband imagined and tapped fellow patients for advice.
Her idea really took off when she connected with Scott Wolford of the Carolina Small Business Development Fund, a community development financial institution (CDFI) that helped her write a business plan, get a loan, and forecast her business’s future needs. In 2018, Marley Transport & Trucking pulled its first load, and since then the growing company has established itself across the state.
There are a lot of smart, ambitious, tenacious women like Shavon Marley out there. What’s different about Marley’s story is that she secured a business loan that catalyzed her success.
Closing the racial wealth gap will bolster the economy
The barriers to lending for communities of color are high: a new McKinsey study found that 30 percent of black families are underserved by banks, and 17 percent are disconnected from banking opportunities.
Economic growth isn’t inclusive either: Black families will earn up to $1 million less than white families in their lifetimes on average. Not only does this place a burden on black communities that persists through generations, the full economic impact is enormous — the racial wealth gap will cost between $1 and $1.5 trillion by 2028, or 4 to 6 percent of US GDP, according to the study’s authors.
The roots of the gap include lack of access to business loans and connections who can provide bootstrap funding for small businesses. Yet entrepreneurship is an effective way to increase income for people of color. In order to end the racial wealth gap and grow the economy, we must find solutions that increase funding for women-of-color entrepreneurs.
Women-owned businesses have the power to transform communities
Business owners who are women of color are levers for wealth and job creation in their communities. The McKinsey study found that the median wealth of a single Black woman is $200, compared with the $28,900 median wealth of a single White man — and business ownership can be a particularly powerful wealth-building tool for women of color. According to Closing the Women’s Wealth Gap, Black women entrepreneurs have a median net worth 10 times greater than that of their nonbusiness-owning peers.
However, these entrepreneurs face the greatest funding challenge: the dearth of loans to women combined with the fact that minority-owned businesses are less likely to be approved for small business loans and often receive lower amounts at higher interest rates. The problem is not a lack of entrepreneurial spirit; according to the US Senate Committee on Small Business & Entrepreneurship, women are the nation’s fastest-growing group of entrepreneurs, and the number of businesses owned by women of color is growing even faster than the aggregate — 9 percent between 2007 and 2018.
These inequities exact a huge opportunity cost, not only for individual women and their families, but for entire communities. Look at the data and you can see how the lending gap contributes to America’s yawning income inequality: American Express research found that if revenues generated by minority women-owned firms matched those generated by all women-owned businesses, they would add four million new jobs and $1.2 trillion in revenue to the US economy.
An immediate solution: CDFIs
CDFIs are designed to move money to Main Street businesses, and they are a vital yet underutilized source of capital for women entrepreneurs.
There are more than 1,000 CDFIs across the US. Often working in neighborhoods overlooked by traditional banks, CDFIs provide capital and financial services where they’re needed most, funding small businesses, affordable housing, education, and community infrastructure.
Yet CDFIs aren’t a go-to lending source for underserved women entrepreneurs, because borrowers either aren’t aware of them or can’t access them. If more women took advantage of CDFI services, which include business advising as well as loans, we could make a substantial dent in lending inequities in the US. For that to happen, though, CDFIs need to be more accessible to both investors — who could be flowing a lot more capital into these community funders — and borrowers.
Building bridges, and knowledge, to overcome funding barriers
One solution aimed at addressing these challenges is the Wisdom Fund, a co-created product designed to provide affordable loans and free coaching for businesses led by women of color and women in low-income communities.
Developed by my firm, CNote, in collaboration with a group of CDFIs and a research team, the Wisdom Fund is also dedicated to discovering and solving for the roadblocks these entrepreneurs experience. We know women-owned firms face higher interest rates for business loans than men-owned firms, and women-owned firms with low credit risk are less likely to secure business loans than men-owned firms with similar credit risk. As Heather McCulloch notes in Closing the Women’s Wealth Gap, “Women of color are doubly affected by the intersections of the racial and gender wealth gaps. They are less likely to have access to affordable financial products and services, business capital, and resources to save for retirement than white men and white women.”
Implicit bias is no doubt one reason for these differences, but there’s a lot we don’t know about why current lending practices are not working for women.
To fill in that knowledge void, Wisdom Fund partners are gathering information on how women interact with the loan process, their product-level needs, barriers to business ownership, and why women opt out of taking on debt. As the program continues, the fund will leverage the data to improve outcomes, experiment with new ways to serve women entrepreneurs, and continue to scale the fund with new partners and investors.
Women entrepreneurs have the drive and creativity — all they need is funding
The Wisdom Fund’s inaugural CDFI partners provide myriad examples of the kinds of entrepreneurs who will benefit from a dedicated flow of loan dollars. The Carolina Small Business Development Fund can fund more entrepreneurs like Shavon Marley. TruFund can support more women like L’Tryce Slade, whose Birmingham, Alabama-based green building construction firm, Slade Land Use, used loan dollars to employ 24 contractors and complete three contracted projects on time and on budget. LiftFund can provide working capital to more entrepreneurs like Myreida Salinas, owner of Myreida’s Linens in Laredo, Texas, who used her financing to expand inventory and expand her linen rental business into décor rental and event planning.
Businesses like these may not become the next tech unicorns, but they’re the kinds of enterprises that fuel local economies across the country and can help close the country’s wealth gaps. To realize that potential, though, Main Street women-of-color entrepreneurs need access to affordable capital and advisory services designed to vault them over the intersecting barriers they face. Growing a business is transformative for the business owner and her community. More women of color should have that experience — and more investors should fund it.