Gaps between African Americans and whites in wealth, credit, and trust are ongoing obstacles that block the startup and growth of black businesses. But the Association for Enterprise Opportunity (AEO) hopes to help change that scenario.
AEO just received a new $1.15 million grant from the W.K. Kellogg Foundation to help black business owners overcome entrepreneurial barriers that have hindered them for decades. Based in Washington, D.C., the AEO is a nonprofit, with over 1,000 members, that provides capital and services to help underserved entrepreneurs open and expand businesses.
The organization plans to use the grant to develop and launch new programs, products, services, and delivery models to boost growth in black entrepreneurship. The grant comes after the AEO last March issued The Tapestry of Black Business Ownership in America: Untapped Opportunities for Success. Some of the report’s findings revealed that blacks often are unable to establish new businesses or make existing ones successful because they have fewer assets (wealth) and less disposable income to invest in their ventures. Black entrepreneurs face decreased access and denial rate to formal credit when trying to secure financing from traditional banks and other mainstream lenders.
And, lack of trust experienced by black people often prevents them from taking actions such as applying for more capital, joining networks, and creating valuable partnerships to help grow their businesses.
The report included data analytics and a survey of 300 business owners—200 of them black. One objective of the study is to change the national conversation about black-owned businesses, focusing on their potential for economic power, instead of just looking at their challenges.
With the grant, AEO will work with black small business owners, business service providers, and Community Development Financial Institutions (CDFIs) to develop trusted technical assistance programs. The programs will be geared specifically to help black businesses grow and create jobs in low-income communities. It will use scalable and technology-centric solutions for financial bookkeeping and other business operating systems.
Once established, the AEO will introduce the model into multiple communities throughout the country over a three-year grant period.
“We don’t just want black-owned businesses to survive, we want them to thrive,” stated AEO President and CEO Connie Evans. “We have a real problem with wealth inequality in America, and entrepreneurship has proven to be a powerful solution. She says the AEO findings show that the discrepancy in average wealth between white and black Americans is reduced from a multiplier of 13 to 3 when comparing business owners. The median net worth of a black business owner is 12 times that of a black non-business owner.
Evans says imagine what would happen to the wealth gap if black business owners had access to products and services that worked for them instead of against them. “Our goal with this generous grant is to collaborate with industry partners to develop solutions for black business owners, and we are grateful to the Kellogg Foundation for this momentous opportunity.” For its part, the Kellogg Foundation is stepping up again to back AEO’s efforts.
“The Kellogg Foundation funded AEO’s report on black business ownership last year because we knew it was imperative to understand what black business owners need in order to stabilize and grow their entrepreneurial endeavors,” stated Carla Thompson Payton, vice president for program strategy at the Kellogg Foundation.
“We are excited to be part of this initiative, which will help reduce the economic vulnerability of young children by providing income-earning and wealth-building opportunities for their parents through business ownership. AEO has the trusted relationships and track record for managing data-driven innovation projects essential to a collaboration of this kind, and we look forward to seeing the impact of this new program on underserved communities.”