Background
When everyone is contributing to and benefiting from our economy, our region will truly thrive. Supporting greater opportunities for Chicagoans from underinvested communities to own their own businesses is one important step toward that vision.
In the City that Works, small businesses employ approximately 58 percent of workers. Enabling local entrepreneurs to start and grow businesses in underinvested communities creates jobs, which in turn helps people improve their incomes.
By owning a small business, people can accrue wealth and pass it down to future generations: Business ownership represents 34 percent of non-financial assets in the U.S., according to 2019 data from the Federal Reserve.
The Fund for Equitable Business Growth addresses disparities in access to business funding opportunities and support services.
Disparities
White-owned businesses represent well over 50 percent (and often up to 70 percent or more) of all establishments in Chicago.
The average white-owned business is valued at more than 12 times the value of the average Black-owned business.
While some white entrepreneurs can rely on family and friends for startup funds, it is much more difficult for Black and Latine entrepreneurs to rely on their family networks. That is no surprise given that the net worth of a typical white family is nearly eight times greater than that of a Black family—$188,200 vs. $24,100—and more than five times that of a Latine family—$188,200 vs. $36,100.
Less than 15%
of business establishments in Chicago are Black-owned
Less than 10%
of business establishments in Chicago are Latine-owned
What Entrepreneurs Need
The needs of Black and Latine entrepreneurs are different from those of more privileged entrepreneurs who may already have generational wealth, connections to opportunities, and access to resources that support their growth and longevity.
Research has shown small businesses owned by Black and Latine entrepreneurs need access to capital and expanded business networks, coordination among business service providers, improved business delivery, and more specialized service options.
Access to capital and expanded business networks
Our research identified a debt-capital gap of upwards of $250,000 for all Black and Latine entrepreneurs. That means these entrepreneurs have much less money to start or grow their businesses than their white counterparts.
Conversations with Black and Latine entrepreneurs have revealed they need resources to support startup activities because they can’t count on friends and family funding for capital investments at the same rates as white entrepreneurs.
Coordination among business service providers
As an entrepreneur, knowing where to start and where to go for help, funding, training, or certification can be overwhelming. That is why Business Service Organizations (BSOs) need to work together so that entrepreneurs can worry less about where to get assistance and focus more on what they need to do to succeed.
Improved business delivery and enhanced specialized service options
For Business Service Organizations to be helpful to Black and Latine entrepreneurs, they must meet the businesses’ specific needs and be easily accessible. That means offering entrepreneurs technical business skills training in things like the basics of financial reporting, such as how to use QuickBooks, and the importance of inventory control.
The Fund for Equitable Business Growth was created to bring funders together in support of a shared mission to reduce Chicago’s racial and ethnic wealth gap.
The Fund for Equitable Business Growth
FEBG was created in direct response to a Next Street study commissioned by JPMorgan Chase, Polk Brothers Foundation, and The Chicago Community Trust, which uncovered significant disparities in:
- Business ownership when comparing whites to Black and Latine entrepreneurs
- Relative performance and growth of small businesses and access to critical support services and capital resources
- Employment opportunities along racial, ethnic, gender, and geographic lines
The Chicago Community Trust joined other institutional funders to create FEBG and advance their shared mission to reduce the Chicago region’s racial and ethnic wealth gap.