Access to capital, training and mentorship networks is critical to the success of minority-owned businesses
Image credit: Laura Carrasco-Quezada (pictured) and her sister, Sandra, own Bites & Bowls, a breakfast and lunch eatery in Springdale, Arkansas.
This article was made possible by the Walton Family Foundation, a SOCAP21 partner. Author Yee-Lin Lai is a senior program officer on the Home Region Program supporting entrepreneurial development for the Walton Family Foundation. This article was first published in Arkansas Business on Aug. 31, 2020.
Laura and Sandra Carrasco-Quezada are sisters who always dreamed of creating a restaurant. So, a few years ago, they decided to take the plunge and open an eatery in Springdale, Arkansas to offer family-friendly, healthy breakfast and lunch options.
Needing startup capital, they approached several banks but were rejected. With few options, they borrowed seed money from their parents.
Unfortunately, Laura and Sandra’s experience is not unique. Entrepreneurs of color are facing a skewed playing field. On average, minority households in the U.S. have significantly less wealth than white households, leaving them with less money to start a business and less collateral to qualify for credit.
According to the Brookings Institution, big banks approve about 60% of loans sought by white small-business owners, 50% by Hispanic small-business owners and only 29% by Black small-business owners.
This disparity is a primary factor in why entrepreneurs of color own less than 20% of businesses with paid employees, despite making up nearly 40% of the nation’s population. In Northwest Arkansas, Hispanic residents over the age of 25 are 13% of the population, but they own only 2% of the region’s small businesses.
Similarly, Black residents represent 0.5% of the region’s ownership, though they’re 2% of the population. If not addressed, this trend of demographic inequalities in access to entrepreneurial resources will hamper efforts to realize Arkansas’ full potential for innovation development and job creation.
COVID-19 stresses the need to level the entrepreneurial playing field. Among vulnerable small businesses, minority-owned ventures may be most at risk.
At the Walton Family Foundation, we recognize the important role minority-owned businesses play in adding vibrancy, creating jobs and contributing innovative concepts.
As a McKinsey report noted, COVID-19 will disproportionately impact minority-owned companies, which are often service-based, such as hospitality and retail, and have been severely disrupted.
At the Walton Family Foundation, we recognize the important role minority-owned businesses play in adding vibrancy, creating jobs and contributing innovative concepts.
We are supporting efforts to develop a strong entrepreneurial ecosystem in Northwest Arkansas and enhance targeted job creation in the Delta. An integral part of those efforts is helping entrepreneurs of color receive access to capital, training opportunities, mentorship networks and ongoing support. And we see the need to expand our efforts during the COVID-19 crisis.
Like all communities, Northwest Arkansas and the Mississippi Delta region are reeling from the coronavirus pandemic. The foundation is aiding organizations with a local presence, such as Winrock International and Southern Bancorp Community Partners, to help businesses.
We are also connecting local organizations with national partners that help increase capacity and access to capital. Take as an example our recent work with Kiva U.S., a San Francisco-based nonprofit that offers microloans to traditionally underserved entrepreneurs.
Kiva worked with local partners to establish hubs in Northwest Arkansas and the Mississippi Delta. The goal for both: to provide no-collateral-required, no-fee, no-interest crowdsourced microloans of up to $10,000 to aspiring or existing entrepreneurs who would otherwise be excluded from typical financing. The foundation offers Kiva Hubs resources to match those loans.
As the COVID-19 pandemic continues, we have increased the resources these organizations can deploy in their communities. In Northwest Arkansas alone, the Kiva Hub has assisted 17 companies and counting in procuring loans of more than $100,000. A full 94% of these ventures are women- and/or minority-owned.
Laura and Sandra Carrasco-Quezada were some of the first entrepreneurs to leverage Kiva Northwest Arkansas to crowdsource loan capital for buying equipment and conducting marketing to enhance their business, Bites & Bowls.
Their loan campaign was immensely successful, raising the necessary funds within a day of launching. They did not need to turn to their parents this time.
Now imagine how many more businesses and jobs Arkansas could create or sustain if we leveled the playing field for entrepreneurs of color.
