By Rieva Lesonsky
Access to capital is one of the biggest challenges small business owners face, and minority-owned businesses don’t have equal access to credit or capital. But there is some relief in sight.
The New York Times reported that corporate giant Macy’s will invest $30 million in the next five years “to support businesses run by people from underrepresented groups in the retail industry.” Target continues with its commitment to spend $2 billion with Black-owned businesses by 2025. Sephora and other companies have promised to dedicate a percentage of shelf space to minority-owned businesses.
And a few months ago, Hello Alice and the Global Entrepreneurship Network (GEN) launched a $70 million Equitable Access Fund, with initial funding led by Wells Fargo. The fund is part of the Equitable Access Program, offering “increased credit access and financial education” to underserved entrepreneurs.
I recently talked to Elizabeth Gore, the president and CEO of Hello Alice, about the fund.
Rieva Lesonsky: Tell us more about the new $70 million Equitable Access Fund Hello Alice launched with the Global Entrepreneurship Network.
Elizabeth Gore: The Equitable Access Fund (EAF) is part of the Equitable Access Program (EAP), which provides access to credit and financial education to promising and historically underserved entrepreneurs within the “New Majority,” which includes people of color, women, members of the LGBTQ+ community, immigrants, veterans, and small business owners with disabilities.
Access to credit remains a significant problem for entrepreneurs. Estimates indicate that [minority-owned] business owners have around $40 billion in unmet financing demand, while all small businesses nationally have $1 trillion in unmet financing demand. The EAF will grant credit enhancements, such as guarantees and loan loss reserves, to Hello Alice financing partners. This will enable the financing partners to supply credit to disadvantaged small business owners who could not access it otherwise.
And these enhancements will help many small business owners secure their first-ever business credit card through the Hello Alice Small Business Mastercard program. Once a business has demonstrated performance on the credit or loan product, the money held as a credit enhancement will be unlocked and recycled to other business owners, creating a virtuous cycle.
Applicants will be selected based on personal and business credit history and business characteristics. The eligibility for EAF-supported financing products is more accessible than the financing partners’ traditional eligibility parameters. Payment history will be reported to business credit bureaus, which will help business owners build a business credit profile. This can reduce their reliance on personal credit, personal guarantees, and predatory loans—resulting in greater financial freedom and less risk to them and their families.
Lesonsky: How can small business owners participate?
Gore: Any small business owner is eligible to benefit from the EAF. The first step is to sign up for Hello Alice (it’s free). Hello Alice users (90% are categorized as New Majority members) then submit an application for financing solutions, including the Hello Alice Small Business Mastercard. Then, GEN, Hello Alice, and the financing partners will determine eligibility based on information submitted in financing applications.
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Lesonsky: Since these business owners are traditionally underfunded, will the lending parameters be different?
Gore: Yes, the EAF was specifically designed to raise financing partners’ ability to increase access to credit products and services. As a result, eligibility criteria are much more accessible than their traditional lending parameters, as their risk tolerance for loans increases.
Lesonsky: Any ideas on how many small businesses you can reach and help?
Gore: Our goal is to unlock up to $1 billion in credit access over the next five years, which could help thousands of small businesses grow and improve their financial health. The ultimate number of businesses reached will depend on the average size of financing businesses receive.
Lesonsky: I understand that small business owners will be provided credit-building education and technical assistance as part of the program. Can you tell me about that?
Gore: We launched the Business Health Score last April. It’s an assessment tool that provides a comprehensive overview of a business’s financial health. This allows small business owners to make informed decisions about improving their financial performance and achieving long-term success through a real-time recommendation engine. Both the score and the fund enable banks to better serve small businesses and demonstrate the lucrative value of investing in the New Majority.
Writer’s note: Business credit card statistics underscore how deep the need is for small business owners to get a card. According to data from Hello Alice, while 90% of small business owners without business credit believe a business credit card would positively impact their businesses, only 25% have even applied for a business credit card, and 85% of those applications were denied due to poor credit or lack of credit.
About the Author
Rieva Lesonsky is CEO of GrowBiz Media and SmallBusinessCurrents.com and has been covering small businesses and entrepreneurship for over 30 years. Get more insights about business trends by signing up for her free Currents newsletter.
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