Crain’s Detroit Business
March 27, 2023
With concerted effort in recent years, the region has built an ecosystem of early stage support for Black entrepreneurs.
But there are hurdles.
“There is money out there. It is getting Black entrepreneurs access to that money that has been the challenge,” said Wafa Dinaro, executive director of the New Economy Initiative, a foundation-led economic development initiative that’s honed in on small business growth for much of its 16-year history.
There’s also a gap in next-level support for Black and other under-served entrepreneurs looking to scale up the small businesses they have started.
“We filled the early stage needs and now it’s looking at how do we support those businesses that are ready to grow and expand,” she said. “…There’s a lack of providers that have this expertise.”
Black entrepreneurs in the region have been historically excluded from traditional financial institutions and organizations, Ken Harris, president and CEO of the National Business League, said in an emailed statement.
“All funding programs and initiatives that work directly with Black-led business organizations are finding that there is not enough money in the marketplace to help the more than 62,000 Black-owned businesses (2019 Census) throughout the region,” he said.
“Because non-Black led financial institutions, systems and structures have failed for decades to connect with Black-owned businesses, Black entrepreneurs have just given up entirely.”
Black-owned businesses in the region need all the resources and technical assistance support they can get, he said.
“Intentional development of Black business is the biggest need currently, where most non-Black-led business organizations and philanthropic initiatives have failed to accomplish or produce results for an overwhelming need in the Black community.”
Historically, there has been lack of capital, Dinaro said. But more money is coming to community development institutions and other nonprofit lenders in recent years. And more support is on the way.
In August, the state announced $72 million in initial funding through the U.S. Department of Treasury State Small Business Credit Initiative. The funding is part of $10 million in American Rescue Plan Act money. It is supporting loans and equity investments for early stage, technology-based businesses in Michigan as part of the Small Business Venture Capital Program, the state said. As part of that, support is going for loans of $250,000 or less for small businesses, with a focus on businesses owned by socially and economically disadvantaged individuals or businesses with fewer than 10 employees.
“Right now the ecosystem does a really good job of providing the resources for early stage, startups and existing businesses that are small and need that one-on-one support,” Dinaro said.
“We see the gap as making sure these businesses know this funding is coming, connecting them and making sure they have all of their ducks in a row … to be able to access these funds.”
NEI is in the middle of an evaluation to assess what is and isn’t working to get more people ready for financial help and applying for it, she said. It has created community events and websites and hired “trusted connectors” to help entrepreneurs in neighborhoods get resources that include education, training, mentorship programs and funding.
“A lot of business owners are so busy trying to run day-to-day operations, they may just not be interested in taking an hour to talk to a coach or may think the way they are running things is just fine,” she said.
“It’s getting them to trust the trusted connector and connecting to the resources that are available. … It’s been very difficult to get the resources that are available into the hands of those who need it.”
Mistrust is a big part of the reason they are not accessing available support, said Dwan Dandridge, founder and CEO of Black Leaders Detroit, a nonprofit providing zero-interest loans to Black entrepreneurs in Detroit with donations and funding from NEI and other foundations.
“There is still a huge trust issue as it relates to Black entrepreneurs and funding sources. Often times, some of the Black entrepreneurs will not even apply for funding, even if they know it’s available, because of the horror stories,” he said.
“When we talk about there being systemic issues and barriers that have historically prevented Black entrepreneurs from gaining access to resources, it’s real, lived experience. When they hear about funding, many of them are still reluctant to apply.”
When they don’t get funding, they walk away wondering if it was because they weren’t qualified or “because the deck is still stacked … because I’m Black,” Dandridge said.
If the funding is targeted toward Black entrepreneurs, it should just say so, he said, as opposed to saying it’s for BIPOC or minority entrepreneurs.
“Everyone else might hear Black when you say that, but for Black entrepreneurs, we’re coming to right the wrongs of the past,” he said.
“We don’t trust that funding is really set up for us. If you want to build trust and get more of us to apply and to use the other support that’s out there … we have to be able to say this funding is set up for Black entrepreneurs in Detroit. That will help create the trust that’s missing in this space.”
Black Leaders Detroit is seeing a rush of applicants, he said. Just under 500 Black entrepreneurs applied for loans of up to $20,000 last year. Of those, 42 received one.
“There were definitely some businesses that were not ready for funding just yet,” Dandridge said.