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What does the election of Joe Biden mean for black entrepreneurs

This week has seen the welcomed inauguration of America’s 46th President, Joseph R. Biden, and with him, the history-making choice of Vice-President Kamala Harris. It would be nearly impossible to overstate the difference in choices the country made in electing Biden over the previous occupant of the White House. And while the President assumes leadership amid several crises – COVID-19, the economy, racial injustice, immigration reform and climate change - he must also juggle less inflammatory, but critically important matters, such as the equitable growth of black-owned small businesses.

The pressure on the Biden Administration to make good on matters of equity and justice loom large. In his November 7, 2020 election victory speech, President-Elect Biden remarked, “…especially those moments where this campaign was at its lowest ebb, the African-American community stood up for me. You’ve always had my back and I’ll have yours.”

What could having the back of black entrepreneurs look like?

Access to capital has been a documented challenge to black business growth dating back to the mid-1800s. It would seem little has changed in this regard. In its 2019 report The State of Black Entrepreneurship in America, the Congressional Black Caucus reported, “Black entrepreneurs are almost three times more likely than Whites (10.1 percent) to report their business profits have been negatively impacted by access to capital.”

Obviously there is ample room for the Biden administration to examine policy solutions to get more investment capital to black-owned and community banks that they could in turn, lend out to black businesses, better positioning them for growth. Doyle Mitchell, president and CEO of black-owned Industrial Bank in Washington, D.C. has long been an advocate of creating a tax credit for investing in minority banks, to incentivize investors who might be interested in making a difference when it comes to equal opportunity for minority communities.

The Center for American Progress (CAP) has noted that “while Black Americans make up 13 percent of the U.S. population, they own less than 2 percent of small businesses with employees. By contrast, white Americans make up 60 percent of the U.S. population but own 82 percent of small employer firms. If financial capital were more evenly distributed and Black Americans enjoyed the same business ownership and success rates as their white counterparts, there would be approximately 860,000 additional Black-owned firms employing more than 10 million people.”

There are also existing tools at the disposal of the federal government to advance equitable growth of black-owned businesses. In 1969, President Richard Nixon made the hollow gesture of creating the Office of Minority Business Enterprise, but allocated no funding to it. That sham of an office was rebranded (and funded) in 1979 by President Jimmy Carter as the Minority Business Development Agency. However, its effectiveness remains limited, due in large part to its paltry funding. President Biden should increase its funding in his first budget. As CAP has suggested, funding could be used to issue government-backed loans to minority business investment funds, establish business incubators/accelerators at Historically Black Colleges and Universities, and increase the paltry number of grants issued annually to address both increasing the growth of minority-owned businesses and reducing the racial wealth gap.

Additionally, there is the federal government’s own spending as a tool in supporting black business growth. Under the Small Business Subcontracting Program (FAR 19.7), the U.S. federal government requires any contractor whose contract for goods and services is expected to exceed $700,000 ($1.5 million for construction) to set and meet aggressive goals of subcontracting spend with underrepresented small businesses from specified categories. That requirement should not just apply to contractors, but to states and municipalities receiving federal funding as well. In a state like Louisiana, with its race/gender neutrality on procurement, such a requirement could prove pivotal for black businesses.

It cannot go without saying that there is also room for entrepreneurs to better position their businesses to receive capital. Having a keen understanding of their market, competition, financials, profit margins and a concrete strategy for growth are all critical to secure capital – whether that be debt or equity. Not all struggles to access capital are because of bias, and there are organizations, like my own – Go.Be. (formerly Good Work Network) – positioned to help entrepreneurs meeting opportunity by being fully prepared. All lessons need not be learned the hard way – and taking advantage of the increasing number of resources and organizations to make one’s company more competitive is easier than ever.

While more capital alone isn’t enough to reverse generations of intentionally biased and exclusionary practices in everything from business lending to redlining, school funding formulas to zoning determinations, it is critically important. William A. Darity, the Samuel DuBois Cook Distinguished Professor of Public Policy at Duke University, speaks of the need for a “portfolio of reparations”, which I support. There isn’t single policy created by one presidential administration or single federal agency that created the gulf of inequity we see in America today among small businesses. It will take multiple approaches to begin to turn the tide. These systems were created on purpose and they can be dismantled with the same intentionality if there is the will among those in power to do so.

Near the conclusion of his inaugural address on Wednesday President Biden posed several pertinent questions.

“It’s time for boldness, for there is so much to do. And this is certain, I promise you: We will be judged, you and I, by how we resolve these cascading crises of our era. Will we rise to the occasion is the question. Will we master this rare and difficult hour? Will we meet our obligations and pass along a new and better world to our children?”

Only time will tell. Those of us who care about equitable economies, of closing the racial wealth gap, and of the future of black business should not just wait and see. We must push for decisive action and hold this Administration accountable. The black community - who has always had the back of modern Democratic leadership - must insist at last that they have ours as well.

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