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Melissa ~ Access to Capital

“What you saw in PPP was a time-bound example of how many different systems have played out to restrict access to capital for people of color."

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“The way people access capital across the country has got to change dramatically. This has been abundantly clear during the last eight to 10 months, seeing how the PPP funding was ultimately distributed. In some ways, it was sickening and in some ways, it was the most expected thing in the world because we know that entrepreneurs are treated differently based on race when it comes to access to capital. That's just a fact. We've known that for a long time.

And so what you saw in PPP was a time-bound example of how many different systems have played out to restrict access to capital for people of color. In Kansas City, for instance, there were more than 4,600 PPP loans made in the metro area and fewer than two dozen went to people of color. It's sickening. And I think that happened for a lot of reasons. Some of them are easy to fix, and some of them aren't.

On the macro level, community banks have been consolidating for the last 20 years because of regulatory issues that are systems level issues. But the impact that has had is that the number of black owned banks has been cut in half over the last 20 years. There are fewer than 100 black-owned banks in the entire country. So when you think about how loans get made, a lot of times relationships are important.

And that was underlined during PPP, when most banks went first to those with whom they've had a previous lending relationship, and offered PPP to them, to the point where many banks didn't even consider PPP applications from new clients and from people to whom they have not previously made a loan. Well, you know, there were a handful of banks that made loans to people that had maybe a personal checking or savings relationship with the bank, the general banking relationship, but did not yet have a lending relationship. No one made PPP loans to new clients. And when you think about differentials in the number of people in our country that are banked, not banked and underbanked, that has a real impact that cuts along racial lines.

We need to create new pathways to access capital for people who've been shut out of traditional capital systems, both in terms of equity and debt. Most of my work here at Kauffman is focused on four states in the middle of the country that we call the Heartland, and that's Kansas, Missouri, Nebraska, and Iowa. We focus on remaking entrepreneurship as a force for inclusion in these four states and access to capital is key. People from outside of this region might look at us sideways when we say something like that. But the reality is that in the middle of the country, regardless of how it's perceived, these states have been home to Black communities, Latino communities, indigenous communities, for their entire history and they're an important part of where we come from. The population among communities of color in these four states is projected to grow more quickly over the next 20 years than almost anywhere else in the country.

So we have an urgent need to make entrepreneurship more inclusive because that will make our economic future more inclusive. And we've got to start now, so this sense of urgency really imbues our work. Creating more inclusive prosperity here in Kansas City, across this region, and ultimately nationally."

-- Melissa Roberts, Kauffman Foundation (October 2020)


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