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Economic Justice Fund
What We Believe

The Critical Need for Capital

The Critical Need for Capital

We believe that underserved entrepreneurs lack access to the capital they need to be successful.

Gaining access to funding is one of the biggest challenges entrepreneurs face and the most critical to their success.

A report by the Ewing Marion Kauffman Foundation states that 90 to 95 percent of businesses with employees need financing when they are getting started, but only 16.5 percent use a loan from a bank or other financial institution as a source of startup capital. The report notes that 64.4 percent of entrepreneurs rely on personal or family savings and 14 percent rely on personal or business credit cards to launch their businesses.01

Underserved entrepreneurs face special obstacles to obtaining financing:

  • Wealth disparities – In 2016, the median wealth of white households in the U.S. was 10 times greater than the wealth of black households and eight times greater than the wealth of Hispanic households.02 Low-income entrepreneurs often do not have adequate savings to start their businesses or strong enough credit histories to qualify for a loan.
  • Racial and ethnic disparities – Minority-owned firms are more likely to apply for financing than are non-minority firms but are less likely to be approved. Even when low-risk minority applicants are approved, they are less likely to receive the full amount they requested than are comparable low-risk non-minority applicants.03
  • Gender disparities – Women in business are often perceived as less credible than their male counterparts. Women entrepreneurs typically raise less capital to start their businesses than men do and rely more on personal, rather than external, sources of financing. This remains true in the years after women have started their businesses.04

These disparities constrain the ability of underserved entrepreneurs to secure the capital they need, which in turn constrains their ability to start and to grow their businesses. The result is that underserved entrepreneurs have fewer opportunities to succeed.

We believe that underserved entrepreneurs deserve to have equal access to capital, and we are committed to providing the financing they need to build successful businesses that will generate new economic opportunity for their communities as well as for themselves.

40%

Percentage of low-risk minority firms approved for full loan amount requested05

68%

Percentage of low-risk non-minority firms approved for full loan amount requested05

  1. Access to Capital for Entrepreneurs: Removing Barriers, Ewing Marion Kauffman Foundation, April 2019.
  2. “How wealth inequality has changed in the U.S. since the Great Recession, by race, ethnicity and income,” Pew Research Center, November 1, 2017.
  3. Mind the Gap: How Do Credit Market Experiences and Borrowing Patterns Differ for Minority-Owned Firms?, Federal Reserve Bank of Atlanta, Community and Economic Development Department, September 2018.
  4. Understanding the Landscape: Access to Capital for Women Entrepreneurs, Prepared by the Federal Research Division, Library of Congress, under an Interagency Agreement with the National Women’s Business Council, 2018.
  5. Mind the Gap: How Do Credit Market Experiences and Borrowing Patterns Differ for Minority-Owned Firms?, Federal Reserve Bank of Atlanta, Community and Economic Development Department, September 2018.