3 Innovative Strategies to Help Black Entrepreneurs Grow

Black-owned small businesses are often at an economic and societal disadvantage compared to their counterparts. The best way to counter this problem is for communities and business leaders to invest in these underserved entrepreneurs and provide opportunities to access the capital they need to thrive.

In the U.S. Chamber of Commerce Foundation’s fifth annual MBA Case Competition, MBA students from three schools were asked to come up with ways in which Black entrepreneurs could benefit from opening a new bank location and procuring a $10 million investment. Here are some of the strategies they devised for leveraging the money and resources.

Overcoming Financial Obstacles to Launch a Business as a Black Entrepreneur

Rachel Craig, Brittany Fidalgo, and Gustavo Rezende of New York University had two goals in mind when they created their Equitable Community Bank’s Equity Initiative. The first is to use loans, resources, and partnerships to support local Black-owned businesses and help them gain access to capital in order to grow.

“Detroit has a 78.3% population that identifies as Black, and [there are] currently 49,000 Black-owned businesses,” said Craig. “That makes up about 80% of the Detroit small business scene. As we know, having an infrastructure is essential for success. The opportunity to improve access to capital in Corktown, in particular, is tremendous.”

Secondly, they want to use Detroit’s existing infrastructure to establish Corktown’s first ECB bank branch by 2022, in an area that is currently known as a bank desert. They hope to grow it into “a trusted bank for generations to come in the holistic Detroit Metro area.”

“We want it to be a multi-functional facility where the Black business owners and entrepreneurs that we're partnering and working with can come in and work together in a shared space and use it for additional programming and innovation,” said Fidalgo. “So we really see it as becoming a hub for the community.”

Gaining Access to Credit in Underserved Areas

Phillip Bellis, Jacob Landwehr, and Geoffrey Middleberg of Temple University see North Philadelphia as a location where the community could benefit from a new branch location to serve Black-owned small businesses.

In North Philadelphia, “approximately 80% of the population is Black with an average household income of $24,700,” Bellis noted. “According to the North Broad Street Renaissance, 1,300 small businesses need financial assistance.”

While they find that Philadelphia is underserved, there are pre-existing initiatives they believe are important to collaborate with, rather than attempting to replace or compete with.

“Philadelphia has almost 70 economic development and or community revitalization organizations,” Bellis continued. “It is imperative that the bank collaborates with this already robust network to assess both the wants and needs of the area, prior to enacting any initiative. It will not be the role of ECB to undo, redo, or compete with these efforts.”

Instead, they have proposed the North Philadelphia Community Engagement Project (NPCEP).

“The bank branch itself will serve as the hub of our community outreach based model,” said Bellis. “Bank representatives will act as spokes, engaging with community members and organizations, tying all relationships back to the branch office. The relationships will be the base upon which a community advisory panel is built.”

Investing in the Future to Create Lasting Businesses

In Tulsa, Oklahoma, the former location of Black Wall Street, Black entrepreneurs are struggling to receive funding in order to establish their small businesses. This year’s MBA Case Competition winners, Abhimanyu Bansal, Nicholas Khater, and Maya Stine of Rice University came up with a way to combat this by proposing a transparent lending and “bankable business” strategy.

The Tulsa Racial Equity Engagement (TREE) would build community trust to provide funding, partnerships, and education for Black entrepreneurs to help their businesses thrive. Among Tulsa’s 400,000 residents, 15% of the population is Black and 25% of the population is under 18.

“Tulsa has been seeing a growing number of Black businesses, especially since last year’s movement of Black Lives Matter,” Bansal said. “The medium size of Tulsa resonates with the ECB’s strong points of operating in medium-sized and small geographical areas. Lastly, the Oklahoma government's pro-business policies will help businesses flourish and together the bank and government can really uplift entrepreneurs in Oklahoma.”

TREE would provide more than just funding to these businesses, offering lasting support and resources for businesses to utilize in order to grow future leaders. ECB would introduce a lending rubric, which would help with the branch sustainability by addressing risks upfront.

“We'd like to create a sustainable long-term program that will result in future leaders, and the next generation of Black business owners,” Khater said.