Because many entrepreneurs who are people of color and women are less likely to have the capital needed to start their dream company, American investors who see opportunity in these businesses are using social-impact investment funds to invest in their future growth.
This means supplying diverse entrepreneurs with capital, grants and loans or buying their debt.
The funds align with the Biden administration’s goals of closing the racial wealth and homeownership gap.
“Too many small businesses owned by people of color struggle to access loans and federal programs that can help them grow and succeed,” a White House statement said June 1, 2021, announcing a $30 billion investment in new Small Business Administration initiatives. “President Biden has proposed a historic effort to tackle these persistent challenges and empower small business creation and expansion in communities of color.”
Supporting local small businesses
Leah Fremouw started Bridging Virginia, a nonprofit investment firm, with these exact goals in mind.
“Organizations like mine provide lending and other capital resources to people in communities that have been systemically left out and historically marginalized,” she says. “We have a human, people-first approach with the capital coming in as part of the solution.”
Started in 2020, Bridging Virginia gives loans of up to $50,000 to people of color and women business owners or nonprofit organizations that need “flexible and affordable capital to support their growth and development,” according to their website.
One of their partners, Creative NxGen Petroleum, is the only 100% women-owned fuel supplier in Virginia. In 2020, during a fluctuating market worsened by the pandemic, its founder Charlene Reynolds needed capital to expand.
Bridging Virginia stepped in to provide $30,000 of working capital to keep the business going.
Boston Impact Initiative chief executive officer Betty Francisco says financing entrepreneurs who are women and people of color is essential to building the national and international economy.
“As a Latina and Asian person by background, I often saw the barriers that our small, minority-owned businesses have in terms of raising capital, having access to resources or the networks needed to grow your business,” she says. “I had grown my own network and I wanted to use it for good.”
Over the past year, Boston Impact Initiative’s fund created 1,415 jobs — 80% of which went to people of color, according to their annual report. Of the 50 businesses the fund supports, 67% of the entrepreneurs identify as people of color and 38% are women.
The fund supports small businesses, which can mean single business owners or companies with as many as 300 employees, Francisco says.
One business, ChopValue Boston, is a slightly larger small business — a national chain with an office in Massachusetts. The Boston company, started in the state by Elaine Chow, takes used chopsticks and turns them into furniture and decorations.
Another smaller business, Synergy Contracting, was founded and is run by Jeysi Zuniga. It’s an LGBTQI+ owned company that works to retrofit homes — specifically those owned by Black and Hispanic homeowners — to be more environmentally friendly.
With help from Boston Impact, Synergy has expanded from one truck to three trucks and gone from four employees to 12.
“We’re looking for companies that are tackling big social issues and maybe increasing diversity or they’re looking to operate their business in a more impactful way,” Francisco says. “By virtue of that, the focus is on building ownership in communities of color by providing that early capital.”