Access to capital is a critical challenge that many small business owners face, particularly those from minority-owned businesses. Unfortunately, these businesses often struggle to secure credit or capital on an equal footing with their counterparts. However, there is some positive news on the horizon.
In recent news, major corporations like Macy’s and Target have announced initiatives to support businesses owned by underrepresented groups. Macy’s plans to invest $30 million in the next five years to support minority-owned businesses in the retail industry, while Target aims to spend $2 billion with Black-owned businesses by 2025. Companies like Sephora have also committed to dedicating shelf space to minority-owned businesses.
Additionally, Hello Alice and the Global Entrepreneurship Network (GEN) launched the Equitable Access Fund (EAF), a $70 million program supported by Wells Fargo. The EAF is part of the Equitable Access Program (EAP), which aims to provide increased credit access and financial education to underserved entrepreneurs.
In this beginner’s guide, we will explore the EAF and how it can help minority-owned small businesses access the capital they need. We will cover the eligibility requirements, benefits, and how small business owners can participate in the program.
The Equitable Access Fund: Empowering Underserved Entrepreneurs
The Equitable Access Fund (EAF) is a crucial component of the Equitable Access Program (EAP) led by Hello Alice and GEN. It focuses on providing credit and financial education to promising entrepreneurs from historically underserved communities, including people of color, women, LGBTQ+ individuals, immigrants, veterans, and small business owners with disabilities.
Access to Credit: A Significant Challenge for Entrepreneurs
Access to credit remains a substantial challenge for entrepreneurs, especially those from minority-owned businesses. Estimates indicate that minority-owned business owners have around $40 billion in unmet financing demand. Nationally, all small businesses have approximately $1 trillion in unmet financing demand. The EAF aims to bridge this gap by granting credit enhancements, such as guarantees and loan loss reserves, to Hello Alice financing partners.
These enhancements enable financing partners to provide credit to disadvantaged small business owners who may not have access to it otherwise. One of the significant benefits of the EAF is that it helps many small business owners secure their first-ever business credit card through the Hello Alice Small Business Mastercard program. As businesses demonstrate performance on credit or loan products, the credit enhancements are unlocked and recycled to other business owners, creating a virtuous cycle.
Eligibility and Application Process
To benefit from the EAF, any small business owner is eligible. The first step is to sign up for Hello Alice, a free platform that provides valuable resources and support for entrepreneurs. After signing up, Hello Alice users, with 90% categorized as New Majority members, can submit an application for financing solutions, including the Hello Alice Small Business Mastercard. GEN, Hello Alice, and the financing partners will then assess the eligibility based on the information submitted in the financing applications.
Easier Access to Credit: Different Lending Parameters
Traditionally, underfunded business owners face strict lending parameters, making it difficult for them to access credit products and services. However, the EAF aims to change this by raising financing partners’ ability to provide accessible credit solutions. As a result, the eligibility criteria for EAF-supported financing products are more inclusive and considerate of the unique circumstances faced by historically underserved entrepreneurs. The EAF increases financing partners’ risk tolerance for loans, allowing them to serve a broader range of small businesses.
Sizeable Impact: Unlocking up to $1 Billion in Credit Access
The EAF’s ambitious goal is to unlock up to $1 billion in credit access over the next five years. This substantial amount of funding has the potential to help thousands of small businesses grow and improve their financial health. The exact number of businesses reached will depend on the average size of the financing businesses receive, but the impact can be significant in supporting the growth and success of minority-owned small businesses.
Supporting Success: Credit-Building Education and Technical Assistance
As part of the program, small business owners participating in the EAF will receive credit-building education and technical assistance. Hello Alice launched the Business Health Score as an assessment tool last April. It provides a comprehensive overview of a business’s financial health, empowering small business owners to make informed decisions to improve their financial performance and achieve long-term success.
The EAF and the Business Health Score enable banks and financing partners to better serve small businesses and highlight the value of investing in the New Majority. By providing credit-building education and technical assistance, the program empowers small business owners to reduce their reliance on personal credit, personal guarantees, and predatory loans. This not only offers greater financial freedom but also minimizes risk for small business owners and their families.
Conclusion
Accessing capital is a significant challenge for small business owners, particularly those from minority-owned businesses. However, initiatives like Macy’s investment in underrepresented groups, Target’s commitment to spending with Black-owned businesses, and companies like Sephora dedicating shelf space to minority-owned businesses are offering some relief.
Additionally, the Equitable Access Fund (EAF) launched by Hello Alice and GEN aims to provide increased credit access and financial education to historically underserved entrepreneurs. The EAF’s initiatives, including granting credit enhancements and supporting the Hello Alice Small Business Mastercard program, can unlock up to $1 billion in credit access over the next five years.
Small business owners can participate in the EAF by signing up for the Hello Alice platform and applying for financing solutions. The EAF’s unique lending parameters make credit more accessible to historically underserved entrepreneurs, enabling them to build their business credit profile and reduce reliance on personal credit and guarantees.
Through credit-building education and technical assistance, the EAF supports small business owners in improving their financial health, making informed decisions, and achieving long-term success. By investing in the New Majority, the EAF helps create a more equitable business landscape that empowers minority-owned businesses to thrive.
*Writer’s Note: It is crucial to highlight the pressing need for small business owners to obtain a business credit card. Data from Hello Alice shows that while 90% of small business owners without business credit believe a business credit card would positively impact their businesses, only 25% have applied for one. Furthermore, 85% of those applications were denied due to poor credit or lack of credit. Accessing the EAF can help these entrepreneurs overcome these barriers and unlock the benefits of a business credit card.*
