Thriving Small Businesses Energize Local Communities
It is critical that we ensure small businesses owned by people of color and women have equal opportunities for success.
Senior Community Impact Officer,
Hartford Foundation for Public Giving
Small businesses are a critical component of growing, vibrant and equitable communities. They generally spend more on labor, goods and services from local sources, employ more people per unit of sales, and retain more employees during economic downturns. Small businesses can be a source of generational wealth, creating economic mobility and freedom while passing it down among families.
Yet Black and Latinx individuals and communities have not had equal access to the tools that foster successful small businesses due to systemic barriers to accessing financial and social capital (which can include mentors, networks, coaching, and technical assistance.) This lost opportunity for community economic growth and individual wealth creation has snowballed over decades and is felt acutely in cities like Hartford where the majority of residents are people of color.
In a small business needs assessment commissioned by the Hartford Foundation for Public Giving, one Hartford business owner of color shared anonymously: “[When I started] I didn’t know anybody to ask to mentor me, to tell me okay, where should I go? And what should I stay away from? So, the hardest part was feeling definitely like an island as I tried to build.”
As the pandemic took hold and countless brick and mortar businesses were forced to shut down, survival was largely dependent on personal financial reserves and/or ability to borrow, quick adaptation to the new environment, and access to aid programs. A report by the New York Federal Reserve showed that while the number of small business owners nationally dropped by 22 percent, that number was 41 and 32 percent for Black and Latinx business owners, respectively. Businesses owned by people of color had weaker cash positions and banking relationships and unequal access to social capital, the set of formal and informal networks that can make or break a business, especially during challenging times.
It quickly became clear that federal aid programs were not reaching those fragile small businesses. As Kim Hawkins, CEO of HEDCO, a small business lender and technical assistance provider shares: “Our phone has been ringing off the hook since the beginning of the pandemic with questions on how to access resources, and support producing the documentation required. The owners know their businesses, but many lack back-office support, expertise in accounting, etc. and that is where we come in. We helped small business owners understand what their pivot during COVID could look like, what they need to do to get there, and then helped them access resources to make it happen.”
Across the country, cities recognized that federal aid was largely inaccessible for Black and Latinx businesses in their communities. As in other cities, the City of Hartford, Capital for Change, and HEDCO, in partnership with the Hartford Foundation and other funders, quickly formed the Hartford Small Business Emergency Micro-Grant program, with a focus on small neighborhood businesses owned by women and people of color. The program was created with equitable practices in mind to reach target enterprises. Grants rather than more debt, streamlined application requirements, and an emphasis on outreach and technical assistance provided by trusted and culturally competent nonprofit providers.
Dozens of small businesses were able to use these grant dollars to maintain operations and staff in light of declining revenues, or make modifications to their service delivery model or facility to adapt to the new environment.
The Hartford Foundation continues to support the critical role of neighborhood-based technical assistance providers in leveling the playing field. Early in 2021, the Foundation funded this group of nonprofits to increase the level of hands-on technical assistance available for the second round of federal aid programs. “HEDCO has been instrumental to my business” shared Rodney Matthews, owner of Exclusive Linez which prints signs, banners and other marketing materials at its Main Street location. “They have representatives that come by and just check to see how you are doing, tell you what to look out for, and encourage your development… not just monetarily.”
As we look toward reopening and seek to rebuild the sector, we must bolster the structures that foster successful small businesses, particularly in communities of color. We must invest in community focused lenders, push banks to reduce barriers to capital, and we must accentuate the role that outreach, coaching, and technical assistance play in supporting business growth. Join the Hartford Foundation as we work to ensure that small businesses owned by people of color have the same opportunities for success, so we can grow a more vibrant and equitable region.