Good morning, PCV community,
In times of turmoil, Mr. Rogers told kids to “Look for the helpers.” Given what we do at PCV, organizations like us that are economic first responders to the most vulnerable communities are best positioned to be those helpers.
At the 3-month anniversary of the COVID-19 pandemic and the first shelter-in-place orders, too many small businesses have already gone under, especially those led by Black and Brown founders, according to a report from NBER. While well-intentioned, the first PPP loan program failed to reach them because it was designed to be delivered through banks that don’t have the relationships, trust, or intention to lend in diverse communities, much less with small business owners too small to get their attention. For the second PPP, many leaders rightly pushed to create a $1B CDFI carve-out, but by directing that $1B only to those community lenders who do SBA lending, it excluded the majority of community lenders (including PCV) and left out the majority of Black and Brown small business owners who don’t qualify for SBA loans.
The wealth gap and investment gap for small businesses owned by people of color doesn’t just start with the banks, though. Friends and family invest more in startups per year than angel investors and traditional venture capital firms combined. But friends and family wealth vary dramatically. Generations of violent subjugation through slavery, Jim Crow, and continued discrimination in the housing market, redlining, job market, and capital markets have left lack households in the U.S. with a median net worth just one tenth that of white households.
This is the time for CDFIs to stop being “the best kept secret for funding Black and Brown entrepreneurs” and to lean into the racial and economic justice mission we were born to fulfill. Not with a colorblind approach designed to be “equal and fair to all” but an intentional approach that centers race, to meet Black and Brown entrepreneurs where they are, and lean into the racial justice mission we have the potential to fulfill. People of color start more businesses than anyone else, and PCV has been on a journey to improve our reach to minority-owned businesses — by 200% over the last two years. Over 80% of our capital in 2019 went to entrepreneurs of color, and 76% of jobs created through those businesses were in historically underserved communities.
The balance sheets of the nation’s 4,700 banks are made up of $20.3 trillion of assets, but only 21 of those banks are Black-owned or led, and they have total assets of just $5 billion, less than 1% of America’s commercial banking assets. There are many new and exciting ideas out there to seek justice for past wrongs while creating economic justice in the present. We love this idea from Robert F. Smith, essentially proposing a private sector solution to reparations that would force banks to do the right thing while providing billions of dollars of capital to Black-owned banks and CDFIs.
Thank you to our friends at Kaiser Permanente for supporting us in scaling up our BusinessAdvising.org program for Black entrepreneurs and entrepreneurs of color nationwide, to help more of them have a better chance of survival in the coming months, and to be better positioned for a more resilient recovery. Addressing the racial wealth gap and improving community wealth-building is how we affect systemic change, and how CDFIs meet this moment. We can only fulfill that mission with investors and supporters behind us who are aligned with those intentions and invested in our communities; with blended capital that aligns with the patient working capital we offer our small business owners, from crisis relief to an inclusive recovery ahead.
Be safe, be well.
President & CEO, Pacific Community Ventures