It is easy to make assumptions about why some businesses succeed and others fail. We can blame lack of knowledge or expertise. We can pass judgements as outsiders. But when you take the time to speak to those that serve small business owners, real barriers to capital are revealed that are too often overlooked.

We spent a year delving into the capital access barriers for BIPOC-owned businesses in Chicago. Through interviews with 18 different business services providers and an analysis of local and national capital sources, we uncovered key insights on how effective business services work. By listening to those embedded in neighborhoods across Chicago, we deepened our understanding  of the complexity business owners from under-resourced communities face accessing capital.

1. Building trust is crucial to service:  Trust between business owners of color and capital providers is primary to service effectiveness.  Many business owners begin new relationships with mistrust.  Negative past experiences with banks and false “experts” reduce these owners’ willingness to trust. And that trust is not easily transferred to another service or capital source. Building trust takes time and continued commitment for it to be successful. 

2. Finding available services is confusing:  First, business owners turn to a google search and get a confusing array of results without any way to know which is right for them. They may ask friends and family, yet too many don’t know someone who owns businesses they can learn from. Their next stop is often the local businesses they frequent, to get advice on where to get a loan or business help.  These informal referrals often result in a mismatch between needs and services.  Finding better ways to alert businesses about the services available to them is a continuing challenge.  

3. Funded coordination made a big difference:  We concluded that Chicago has a robust network of business services for people of color. That network has been significantly enhanced by support from our client, Fund for Equitable Business Growth (FEBG), which provided grants for coordination efforts that build trusting relationships and strong referral networks between multiple service providers and capital sources. The unique role played by FEBG was praised by those funded.  And it is a model that could be replicated in other metropolitan areas. 

4. Covid 19 stay at home rules had unanticipated benefits:  Coordination among service providers was enhanced by the changes caused by Covid.  The explosion of virtual coaching and training in place of in-person interactions improved the ability of business owners to engage with services they would otherwise ignore due to the long travel times to far away parts of the Metropolitan Area.  In addition, local banks were anxious to disperse the SBA Paycheck Protection Program (PPP) funds.  They worked with local business service organizations to reach small businesses and coordinated with them to ensure the funds were distributed.
   
5. Capital may not be what business owners need: Business service providers help owners to become capital ready. Many owners are not ready to seek capital. They are turned away by banks and other capital sources because they lack the business and financial plan or collateral expected by lenders. We learned more assistance is needed to help business owners complete complex government applications and to meet unique licensing requirements of their industry, whether it is food production, food service, building construction or childcare.

7. Assessment of virtual  options is important: Web based solutions may also help, but they need to be vetted and connected into the network of service providers. There are a plethora of national technology based solutions that are emerging. They may be online training programs, directories of capital sources, online business operational tools and so much more.  Neither business owners or business services providers have the time necessary to assess each of them.  We recommended that FEBG take on this role. 

Our work to uncover overlooked barriers can help service providers better understand the steps needed to increase accessibility for business owners of color. Building trust and empathy for the entrepreneur is the first place to start.  For more information and the full executive summary, contact us.

About Terri:

Terri Barreiro is an expert in systems change and a mission-driven venture advisor. She is an adjunct instructor and fellowship advisor at the Carlson School of Management, University of Minnesota. She is co-founder of and volunteer venture coach at Impact Hub MSP and consultant to nonprofit and philanthropic organizations.

She is co-author of Social Entrepreneurship: the Journey from Issue to Viable Venture and founder of the Donald McNeely Center for Entrepreneurship serving the College of Saint Benedict and Saint Johns’ University. She brings to her work more than 30 years of experience as a nationally recognized nonprofit and philanthropy leader with extensive experience in United Way, corporate giving, and family foundation operations. She earned an MBA and BA cum laude at the University of Minnesota as well as completed an Executive MBA program at Carnegie Mellon University. She has enjoyed volunteering throughout her life, currently serving on the boards of Folk School Warroad, Market Access Fund, and Impact Hub MSP which she co-founded in 2014.  Enjoying birds, nurturing native gardens and prairies is how she shares her leisure hours with her husband.