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In the face of tough economic times, it’s not uncommon to read advice for entrepreneurs that now is the perfect time to launch a new business.
According to an article in “The Greatest Opportunity of a Generation” Forbes. and according to entrepreneur“Entrepreneurship is about taking that idea and doing something about it. today“
Such claims reinforce the well-known Bootstrap myth. Hard workers with great ideas can easily seize the moment and succeed. It’s a perspective that shows a complete disregard for the experience of people living in poverty, especially entrepreneurs who have worked or are working their own way. out of poverty.
The entrepreneurial qualities and spirit we admire are prevalent among the poor. From fixing up the house because the landlord doesn’t respond, to stretching the dollar so the lights are on and the food is on the table, to doing odd jobs that help you achieve your goals, ingenuity, Creativity and hard work are the keys to survival. If only guts and a good idea could lift us out of poverty, the world today would be a very different place.
But we largely fail to recognize the potential of people in underresourced communities and invest in their talents. At the same time, celebrate “successful” exceptions as proof that “anyone can do it.” This is a vicious circle that reinforces the status quo, allowing us to ignore the fact that the social and financial capital that successful entrepreneurs need is generally not available to the poor.
Mark Herbert, Chief Strategy Officer, Small Business Majority, with a network of over 85,000 people, said: Small business owner. “The neighborhood literally has all the talent it takes to be successful. It’s just a lack of access to opportunities.”
A key driver of jobs and opportunities in underresourced communities is the Community Development Finance Institution (CDFI), and when I was mayor, I always wanted Stockton to have a CDFI.
CDFIs are funded by the U.S. Treasury Department and are typically much more responsive to community needs than traditional banks. AmPac Business Capital, an Ontario, Calif.-based CDFI, has made nearly $1 billion in loans, serves more than 1,000 businesses, created or maintained more than 4,000 jobs, and is primarily a non-traditional We provide services to our clients. The organization’s founder and president, Hilda Kennedy, experienced poverty in South Central Los Angeles during her childhood and before starting AmPac, she spent 12 years working in local government and community loans. I was. In short, she gets it.
Kennedy said the main reason low-income entrepreneurs don’t have access to capital is that most financial institutions simply don’t give them the chance to talk about their ideas and situations.
“The five cs that traditionally guide lending decisions—credit history, capacity, collateral, equity, and terms—are written to keep some people out,” Kennedy said. . “People really need the opportunity to tell me Tell their story to partners like CDFI to get a fair shot. “
Entrepreneurs are not always equal noticed CDFI exists. Raising awareness is part of the work we must do. In addition, the state will establish its own CDFI fund to provide millions of dollars of leveraged capital, allowing these institutions to expand their reach.
Another obstacle facing aspiring entrepreneurs is navigating the bureaucracy to obtain resources. According to Yasmeen Muqtasid, co-owner with her husband Mychael Darwin of fashion and design consultancy Omniph Global Marketing, the positive lessons learned from the pandemic are that reducing bureaucracy can help. It was possible.
“Applying for grants, microloans and other resources has been simplified,” she said. She also learned that she can give money directly to those who need it most.
Muqtasid believes these same lessons need to be applied to create programs for entrepreneurs who have historically been denied resources. We look at the man-made racial wealth gap: the denial of intergenerational wealth through slavery, the ban on Social Security and her GI benefits, the red line, the subprime mortgage. Targeting and more have created unique barriers to entry for Black and Brown entrepreneurs.
“We decided on a policy that creates a framework that makes opportunities inaccessible,” Herbert said. “We can make policy decisions to change that.”
To that end, Small Business Majority is calling on the State of California to investigate state banks that can invest in small business owners who are unable to receive traditional bank loans, and which have received technical assistance, microgrant, and well-served services. Increased start-up funding for non-existent communities. For immigrants and limited English proficiency (LEP) individuals.
Governor Gavin Newsom (I serve as his uncompensated adviser) and the California Legislature have made significant progress in updating the California Retail Food Code to allow street vendors to obtain food sales licenses.
Many of these small entrepreneurs, mostly low-income immigrants and other people of color, struggled to abide by outdated rules and regulations. Maria Ortiz, owner of Ortiz Ice Cream in San Bernardino, said the expensive equipment required to obtain a permit was virtually impossible for many to obtain. In fact, according to Monica Robles, president of the Asociacion de Emprendores, many entrepreneurs in the San Bernardino area have been arrested, imprisoned, and their equipment confiscated as a result. Now in our state’s 58 counties, these entrepreneurs can legally and fearlessly run their businesses.
Kennedy and some of her colleagues are also working on structural reforms at the federal level to make loan products more accessible. For example, the SBA Loan Program allows a 10% down payment for commercial real estate instead of the 25% required by commercial banks.
But Kennedy notes that in California, where commercial real estate is likely to sell for at least $1 million, coming up with a $100,000 down payment can be difficult, especially for entrepreneurs of color. doing.
“Over the past decade, less than 10% of these SBA loans have gone to Latino-owned businesses,” she said. “For African-American owned businesses, that’s less than 2% for her, but before the pandemic she was growing at a rate of over 30%.”
Finally, there is a sense that federal, state, and local procurement are not as open to competitive bids from small businesses as entrepreneurs need to survive and thrive.
“We are community experts. Yet every year we ask for contracts and they go to people outside our community. Co-founder of Burgess Brothers, a family-friendly food service Jon Burgess, who has never signed a contract, said: “We want small businesses that have never had a contract to keep their contracts for 10 to 15 years and compete fairly against large, unsuccessful companies. must be.”
There is an abundance of talent, desire, and hard work in underresourced communities across the country. But there are also constant and systemic barriers to capital and opportunity that must be addressed. In doing so, opportunities are truly leveled and aspiring entrepreneurs are able to compete on a level playing field.
Michael Tubbs is the founder of End Poverty in California and a Senior Fellow at the Rosenberg Foundation. He is Gavin his special advisor to Governor Gavin Newsom on economic liquidity and opportunity, and the former Mayor of Stockton.
Opinions expressed in commentary articles on Fortune.com are solely those of the authors and do not necessarily reflect the opinions or beliefs of the authors. luck.
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