Challenged by financing options, Black business owners are turning to crowdsourcing
Black-owned businesses are highlighting how systemic racism continues to hurt their post-pandemic recovery efforts. Young Black entrepreneurs are turning toward crowdsourcing to keep their businesses open.
Take Donte Branch, who moved to Connecticut last year. He said his Taekwondo instructor encouraged him to open a martial arts school two years ago while he was taking classes in the nation's capital.
Branch decided to start his own brick-and-mortar business without the traditional route of going to a financial institution. He sought the crowdfunding platform GoFundMe to generate the money needed to open his school in Branford by setting a goal of $5,000.
Branch said the process has not been easy.
"I had an experience with a landlord in another region or part of Connecticut where I was looking to open and it was just such a hassle," Branch said. "I didn’t feel like I was being treated fairly or with the proper respect. I know that I am young, but it was like the evaluation process just seemed a little extreme.”
Black entrepreneurs have long struggled against discriminatory practices.
It goes back to the days of the Jim Crow-era laws that created “black codes” to limit the freedom of African Americans and insure they were only useful as a cheap labor force after the Civil War.
Today, that has correlated to historically being denied loans more than any other racial group, according to the Center for Responsible Lending.
Anne-Marie Knight, the executive director of the Black Business Alliance in Connecticut, said several banks have maintained implicit biases that reflect systemic racism.
“Banks are in business to make money," Knight said. "They hold out money, but they stay in business by making money. So if they’re making loans, the loans have to meet a certain criteria because their expectation is that the loan will be repaid. If we fall into a category whether it's a group of people or a certain type of business that is not known for being able to pay back the loan, they are not going to take the risk.”
That means Black entrepreneurs and business owners might feel discouraged by the financing process with their local bank, or government programs.
When the federal Paycheck Protection Program ended last year, only 60% of eligible Black-owned businesses applied. And less than half received all of the funding they sought — far less than what white business owners received.
Without a financial institution’s support, Branch said he's relied more on community support and advice, including from his old instructor in D.C.
"We got on the phone and he basically laid out the plans for how to open a Taekwondo school successfully," Branch said. "He suggested to do it in such a way that it's ready for profit and success and how to basically run a successful program by copying and pasting the way he did it 20 years ago. "
GoFundMe issued up to fifteen $2,000 grants to eligible Black-owned businesses in August alone as a way to support the cause.
“We know that $2,000 certainly if you're getting a business off the ground may not be all of the start-up capital," said spokesperson Leigh Lehman. "But we know that it can certainly help and it’s a way to open up doors and have conversations."
Branch's plan is to have his Taekwondo school open sometime this fall despite the challenges. While his GoFundMe page has been helpful, he said he is open to trying out a local financial branch if he’s in need of more money.
“I don’t mind the loans," Branch said. "It’s just the credit drag when it comes to businesses and personal loans. It just messes up every other aspect of the finances.”
The efforts to recognize the financial impact of Black-owned businesses has caught on with some universities in Connecticut.
In August, Quinnipiac University received a $406,000 federal grant from the U.S. Small Business Administration to start a free, 12-week-long business program for minority, woman and veteran business owners in the Greater New Haven area.