Working Together To Drive Diverse-Owned Small Business Growth and Close the Racial Equity Gap
1.14.2022
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LISC StoriesEconomic Development
“…the price that America must pay for the continued oppression of the Negro and other minority groups is the price of its own destruction.”
The COVID-19 pandemic has been rough for most of us and we have a long road ahead. However, America is experiencing an uneven labor force recovery. The unemployment rate fell to 3.9% last month for all U.S. workers but when you zero in on Black women in particular, that group’s unemployment increased to 6.2%. Zoom out a little and you will see for all Black workers, the unemployment rate in December was at 7.1%, more than twice that of white workers (3.2%). This has been a consistent theme throughout American history due to discrimination.
While Black women are launching businesses at higher rates than white men, according to the Harvard Business Review, only 3% of those businesses grow to maturity due to obstacles in accessing capital and the businesses tend to be in industries with high competition and lower profit margins. Many white-owned businesses are able to obtain seed capital from family and friends that have had wealth passed down to them which is least likely in Black families due to the country’s history of redlining and disenfranchisement.
Black households have 12.7% the wealth of white households, which makes them more vulnerable during crises like the COVID-19 pandemic where many jobs have been lost and small businesses are struggling to stay afloat. Wealth allows families to weather financial storms such as these. On average, Black households have 14.5% the wealth of white households, a dollar gap of $838,220.
Policy Link put out a brief back in 2014 stating that the American economy would gain $2.1 trillion in gross domestic product (GDP) every year by closing its racial gaps in income, which would signify a 14% increase. Since metropolitan regions are the most diverse, they would have even greater gains of a 24% increase in GDP. There is growing consensus that increasing inequality hurts the entire country. Standard & Poor’s, the credit ratings agency, warned that increasing inequality is dampening economic growth. The International Monetary Fund performed an analysis of more than 100 countries and found that inequality puts a drag on national economic growth while lower inequality leads to more robust and sustained growth.
If we agree that economic resiliency is important for the country, studies show that cities with less income inequality and segregation and greater racial inclusion will get us there. At LISC LA, we are doing our part to see Martin Luther King Jr’s vision come to fruition. Our mission is to create economic opportunity and support the small businesses in our communities. We are able to do this with incredible partners who share our goals, like Verizon, and who are united in a mission to advance a more equitable, sustainable, and resilient economic recovery from the pandemic.
At the beginning of the pandemic, Verizon understood that small businesses would need help filling urgent financial gaps until normal operations could resume or until more permanent financing became available. They stepped up with a $7.5 million investment in LISC to launch the Verizon Small Business Recovery Fund, which provided grants of up to $10,000 to small businesses, particularly in historically underserved communities hit hard by the pandemic. LISC was able to help hundreds of small businesses receive these grants that helped them both pay their rent and their employees. 90% of the small business grantees from this program were diverse-owned and 88% of the small business grantees operate in underserved communities that historically have not had access to flexible, affordable capital.
Thanks to the Verizon Small Business Recovery Fund, we’ve been able to keep some small businesses in our communities open. This partnership was incredibly meaningful and changed the lives of so many small business owners. Our partnership went beyond grant funding, with offerings that included the Verizon Small Business Digital Ready portal to support small business owners with their digital readiness, especially with the needed changes that businesses needed to make to continue operating during the pandemic. LISC LA, and our 4 partners (Orange County Inland Empire SBDC, the LA Chamber of Commerce, Inclusive Action for the City, and Vermont Slauson Economic Development Corporation), registered 820 small businesses on the Verizon Small Business Digital Ready Platform.
The work we are all doing together is in an effort to materialize the American dream that the country promises. We are thankful to our partners for being with us on this journey.
