Janis Bowdler

By Janis Bowdler
Head of Community Development for Global Philanthropy,
JPMorgan Chase & Co.
Head of Community Development for Global Philanthropy,
JPMorgan Chase & Co.

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Investing in African American Entrepreneurs

Ingenuity. Innovation. Opportunity. These words have inspired generations of entrepreneurs to take a chance on a fledgling idea and build it into something strong, robust and sustainable. Motivated by a passion for their work and a drive to create something lasting for their families and their communities, small business owners are critical drivers of economic growth in our country. Of the roughly 3 million private sector jobs created in 2014, nearly 2 million were generated by small businesses.

African Americans are the fastest growing segment of the nation’s business owners. The number of African American-owned firms increased 60% during the economic expansion of 2002-2007, as compared to roughly 13% growth for white-owned firms. These independent shops, restaurants and service providers are creating jobs and economic opportunity – often in distressed communities – across the country on an unprecedented scale.

However, many African American entrepreneurs are finding it difficult to secure the financing they need to start or grow their business. Turning a great idea into a successful venture takes more than ingenuity. It takes cash, collateral, and often a proven track record of positive cash flow. But for many still recovering from the recession, these traditional underwriting standards can become a high hurdle. This is especially true for African American families who lost nearly half (47%) their wealth during the economic downturn (compared to 26.2% for White families). The impact on African American business owners’ ability to borrow is clear: SBA loans to African American borrowers declined 47% between 2009 and 2013, even as overall SBA loan volume rose roughly 25% during this same period.

To understand the challenges faced by African American entrepreneurs, look no further than Michael Elliot. After a successful career as a film writer, Mr. Michael saw an opportunity to open a business providing manicure and pedicure services for men in an environment created for their comfort. He soon learned that past personal and financial difficulties would hamper his ability to start a new venture.

There are few options for aspiring entrepreneurs that do not qualify for a traditional bank loan. While family and friends are a common source of capital for some, this is not always an option for African American business owners whose families are starting out with less wealth to begin withfootnote 1. With a growing number of higher cost options entering the scene, it’s clear we need a different approach that helps entrepreneurs obtain capital without risking the sustainability of their business.

CDFIs (Community Development Financial Institutions) provide small businesses with the onramp they need to improve and grow their operations, often preparing them for traditional bank loans down the road. VEDC is one such CDFI. JPMorgan Chase is supporting VEDC as they launch a $30 million fund dedicated to helping African American entrepreneurs in the three cities home to the greatest number of African American-owned businesses: New York, Chicago, and Los Angeles. Last month another CDFI, Detroit Development Fund, and JPMorgan Chase and the W.K. Kellogg Foundation also announced a fund dedicated to minority entrepreneurs in their hometown and the fourth largest city for African American-owned businesses. Both VEDC’s and the Detroit Development Fund’s work provides flexible loan terms and provide training and consulting services to strengthen core business operations.

Last year Michael approached VEDC with his idea for Hammer & Nails Men’s Hand & Foot Grooming Shop. Where others saw risk, VEDC saw opportunity. They provided Michael with part of the capital he needed to launch his flagship store in Hollywood, California. We see opportunity as well, and we also understand that some businesses need greater flexibility than is available using standard underwriting criteria. By collaborating with CDFIs like VEDC and Detroit Development Fund we can ensure flexible capital is available to a greater number of talented entrepreneurs.

We see this as just the beginning of what we can accomplish together. We hope others will join us in our mission to generate inclusive economic growth in the communities where we live and work.


About the author: Janis Bowdler is a Head of Community Development for Global Philanthropy, JPMorgan Chase & Co. Previously, she served as economic policy director at the National Council of La Raza.