The first week of May marked National Small Business Week, a time to recognize the importance of entrepreneurship to the American economy and to millions of low-income workers. While entrepreneurs are critical to the economy, especially in its recovery as we come out of the pandemic, they face many challenges in getting their businesses off the ground. Recognizing this, Prosperity Now is committed to supporting low-income, BIPOC (Black, Indigenous and people of color) entrepreneurs as they start and grow their businesses. 

Entrepreneurship is an important tool for helping disadvantaged workers build financial security and wealth. It supports workers who may be excluded from the traditional labor market, and small businesses also fuel job creation in their communities. Entrepreneurship can even help narrow the racial wealth gap. Black business owners are wealthier compared to workers who are not self-employed, which can help reduce the disparity between Black and White wealth levels.  

Despite these benefits, entrepreneurs of color, particularly if they are Black or Latinx, face barriers to launching and growing their businesses. A key challenge is access to capital. BIPOC-owned businesses tend to have less outside capital at founding than White-owned businesses, which contributes to disparities in business values between the two groups.  

Lending discrimination is another major contributor to this capital gap. The Federal Reserve’s Small Business Credit Survey found that even among firms with a low credit risk, Black- and Hispanic/Latinx-owned firms were half as likely to receive the full amount of financing they sought in 2020, compared to White-owned firms. 

To help remediate these inequities, Prosperity Now is focused on strengthening several entrepreneurship-related programs and policies in 2022. One of our target areas is increasing access to capital and technical assistance for low-income and BIPOC entrepreneurs. To achieve this, we advocate for fully funding the Minority Business Development Agency, which supports the growth and competitiveness of minority business enterprises. We are also encouraging Congress to provide BIPOC-led and BIPOC-serving community development financial institutions (CDFIs) with additional resources. Finally, we want to ensure that lending programs, such as the Small Business Administration’s 7(a) and Microloan programs, are equitably designed and delivered. 

Prosperity Now also advocates for maximizing federal contract awards to BIPOC-owned small businesses. Currently, less than 10% of federal agencies’ total contracting dollars go to small disadvantaged businesses—a category that includes many Black- and Latinx-owned firms. Increasing this percentage could drive more federal dollars to vulnerable businesses. 

Finally, it is critical to disaggregate small business lending data by race. The Consumer Financial Protection Bureau (CFPB) must enforce Section 1071 of the Dodd-Frank Act, which can help identify small businesses’ financing needs and allow authorities to tackle lending discrimination. Another way to gather data would be by launching a Government Accountability Office (GAO) study on the ability of entrepreneurship government programs to reach BIPOC communities—including disaggregated data by race and ethnicity. 

These actions can help historically excluded entrepreneurs, particularly those who are Black and Latinx, create a path to prosperity through business ownership. Besides advocating for these programs and policies, Prosperity Now is also developing long-term policy priorities to support entrepreneurship. Please sign up for our Advocacy Center to take action as future opportunities arise.  

Each May, National Small Business Week serves as a reminder to honor entrepreneurs, their businesses and the benefits they provide to their communities and our economy. Let’s do so by creating the supports these individuals need to survive and thrive.