Case for Equity
Entrepreneurs of color are historically undercapitalized and under-resourced as compared to white entrepreneurs (Austin, 2016). For example, Black entrepreneurs typically start with a third of the capital with which white entrepreneurs begin. This reality is further compounded by a range of institutional and cultural barriers to entry faced by these entrepreneurs including predatory lending, institutional discrimination, and lack of network access (McKinsey, 2020). With each successive downturn in the economy, firms owned by women and people of color disproportionately suffer negative impacts (Klein, 2017). Just two months into the COVID pandemic, nearly half of Black businesses had been closed by the economic fallout. Even after recovering, the losses were twice as high as the number of white-owned businesses that sufferance the same fate (Sasso, 2020).
This disparity illuminates the dire need for a capital infusion for entrepreneurs of color on a massive scale to address decades of disinvestment and to eliminate the racial wealth gap. Undercapitalized minority firms are disproportionately sole proprietorships and as such, they are less likely to have employees as compared to white-owned firms. Addressing their capital needs can spur not only business growth but also spur job creation in communities of color.