Early Learnings: Entrepreneurs of Color Fund
In this report, the LISC team behind the innovative Entrepreneurs of Color Fund reflects on how the fund has expanded access to capital for underserved owners and communities. It is meant to spark engagement among funders, investors, lenders and others working in the small business space—identifying sound opportunities to narrow racial capital gaps and promote economic opportunity.
Introduction
The Entreprenuers of Color Fund was launched in Detroit in 2015 as a pilot program to test and implement strategies that bridge persistent capital gaps for Black and Latinx businessowners. Since then, the program has expanded to 10 cities and fueled more than $197.5 million in affordable financing for diverse businesses.
EOCF has two primary goals—to finance growth for entrepreneurs of color and to help community development financial institutions (CDFIs) build their capacity to invest in underserved businesses and communities. Toward that end, EOCF partners with 24 CDFIs and five technical assistance providers, providing grants to help them identify opportunities and deploy capital. EOCF also works with foundations, municipal agencies, and business support organizations to package funding and technical assistance that supports equitable small business growth, including:
- Helping owners expand their access to markets and their customer reach
- Helping firms build their assets, workforce and financial track records to support growth
- Activating commercial corridors to expand economic opportunity, especially in low- and moderate-income (LMI) communities
All of those require not just an increase in the number of loans to Black and Latinx owners but, critically, an increase in the size of the loans deployed. Larger loans support larger scale enterprises and help build wealth in communities of color. They also respond directly to longstanding capital constraints for minority borrowers. Federal Reserve data indicates that entrepreneurs of color are half as likely as white owners to have their loans fully funded. Even owners with strong credit face racial barriers when it comes to accessing appropriate capital.
Related:
Bridging Capital Gaps for Entrepreneurs of Color: EOCF Early Learnings by Steve Hall, LISC VP of Economic Development