Here's How Elizabeth Warren Plans To Close The Startup Capital Gap For Black Entrepreneurs

SAN FRANCISCO, CALIFORNIA - JUNE 01: Elizabeth Warren speaks onstage at the MoveOn Big Ideas Forum at The Warfield Theatre on June 01, 2019 in San Francisco, California. (Photo by Miikka Skaffari/Getty Images for MoveOn)

Here's How Elizabeth Warren Plans To Close The Startup Capital Gap For Black Entrepreneurs

The program will use $7 billion in funding to support over 100,000 minority-owned small businesses.

Published June 14th

Since announcing her candidacy for the 2020 presidential election, Senator Elizabeth Warren has consistently unveiled a series of detailed policy plans. Most recently, Warren revealed “a plan for economic patriotism,” which would unite industrialism and environmentalism to stimulate the economy.

On June 14, Sen. Warren expanded on her plan for the economy by unveiling a proposal to support Black-owned small businesses and to close the startup capital gap for all entrepreneurs of color.

According to the Census Bureau, people of color own 18% of businesses with paid employees even though minorities make up about 40% of the U.S. population. 

Sen. Warren has spoken out about the wealth disparities between white and minority households. This economic disenfranchisement has always limited the amount of capital entrepreneurs of color are able to raise to fund their businesses. However, Sen. Warren says she is committed to leveling the playing field.

“The small business gap is another example of how the racial wealth gap in America holds back our economy and hurts Black, Latinx, Native American, and other minority families and communities. And because the government helped create that wealth gap with decades of sanctioned discrimination, the government has an obligation to address it head on -- with bold policies that go right at the heart of the problem,” Sen. Warren writes in her Medium announcement for the plan.

Here's how the Small Business Equity Fund will help close the startup capital gap for entrepreneurs of color:

  1. 1. $7 billion in funding will be distributed to entrepreneurs of colors in the form of grants and not loans that need to be repaid.

    “Loans aren’t as good as no-strings-attached equity because they leave businesses with debt when they’re trying to grow. Equity helps businesses thrive from the beginning without having to worry about ongoing financial obligations or the risk of default,” Warrant writes.

  2. 2. The Small Business Equity Fund will be regulated like a federal plan, but operated on the state level.

    “The program will have clear federal standards and accountability but operate through states and municipalities, like the successful State Small Business Credit Initiative (SSBCI), which created thousands of jobs and catalyzed billions in private financing,” Sen. Warren writes.

  3. 3. Grants will be reserved for disadvantaged small business owners of color who have less than $100,000 in wealth.

    “That wealth threshold is roughly the national average, but it’s five times the median net worth of Latinx and Black families, and over ten times the median net worth of Native American families,” the Senator writes.

  4. 4. Local governments will be required to follow rules put in place by the State Small Business Credit Initiative to finance and support small businesses.

    “States and cities will have to follow best practices based on the SSBCI to ensure taxpayer money is generating a strong return,” Sen. Warren writes.

  5. In addition to generating the $7 billion for the fund — the amount of money needed to ensure entrepreneurs of color have the same startup capital as white entrepreneurs for the next 10 years — Warren also plans to tackle the systemic racism that has disadvantaged minority-owned small businesses.

    “On day one of my presidency, I will direct all federal pension and retirement funds to seek out a more diverse set of investment managers, building on successful programs like the Smaller Asset Managers Pilot Program,” Warren writes, adding that she’ll also triple the budget for the Minority Business Development Agency.

    Sen. Warren says that, like many of her other proposals, the cost of the Small Business Equity Fund will be covered by her Ultra-Millionaire Tax, a two-cent tax on every dollar of wealth above $50 million.

    “The Small Business Equity Fund is another tool we should use. It will create jobs, spur economic growth, and move us closer to an America where everyone has a fair shot to succeed,” she concludes.

    You can watch Elizabeth Warren detail this plan as well as others during the Black Economic Alliance 2020 presidential forum, airing on BET Sunday, June 16 at 10 a.m. EST.

Written by Rachel Herron

(Photo: Miikka Skaffari/Getty Images for MoveOn)

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