Access to Capital: Remove Barriers to Recovery and Growth

Background

Immigrants are roughly twice as likely as the U.S.-born to start small businesses, but they have trouble accessing the necessary capital to grow and are more likely to stay small or fail earlier as a result.

Issues such as poor or limited credit history, lack of financial literacy, and lack of familiarity with and access to mainstream financial services create unique hurdles for immigrant and refugee entrepreneurs.

Strategies:

A. Leverage the expertise of CDFIs and CDCUs with experience serving immigrant and refugee communities. Organizations that offer lending or micro-lending services to low- to moderate-income borrowers from diverse backgrounds are more likely to provide flexible, low-interest products that meet the needs of immigrant and refugee entrepreneurs. These organizations should be equipped with the staff and resources to provide linguistically and culturally competent services. For example, Inclusiv, which is a national network of credit unions, recently launched the Inclusiv Resilience Fund, which is “an opportunity for minority designated credit unions to receive funding to expand the scope and reach of their financial programs and services for the benefit of the people and communities they serve.”

B. Create a technical assistance network to help business owners navigate the process. Mainstream lending institutions may lack the expertise to provide linguistically and culturally competent services to immigrant and refugee business owners, and may also lack the flexibility to provide products that meet the particular needs of these communities. At the same time, foreign-born and other underserved entrepreneurs may have difficulty navigating the process of applying for small business loans and grants, including through recent relief packages. A technical assistance network that brings together business development organizations, lenders and organizations that serve the target population can help collectively address these challenges.

For example:
The City of Baltimore and the Baltimore Development Corporation have created a TA network with the Baltimore Small Business Support Fund to help immigrant, minority and women-owned businesses access COVID-19 relief and other forms of capital and investment.

C. Support the creation of specialized lending models. Certain lending models and products have emerged in recent years that are designed to serve specific community interests and needs. For example, some faith-based communities — including Muslims as well as some Jewish and Christian groups — are prohibited from paying or receiving interest on financial transactions, which means they may not use most mainstream financial services in the U.S. The Neighborhood Development Center in Minneapolis, MN now provides Islamic financing for small businesses to Muslims and non-Muslims, through an arrangement where no interest is charged. Other models, like the San Francisco-based Mission Asset Fund’s lending circles, allow communities to pool money to invest collectively in a business.