Giving Compass’ Take:
• Chicago’s Neighborhood Opportunity Fund is a model that shows promise in dismantling inequities in small business ownership by funding entrepreneurs of color in underserved commercial corridors.
• How can city officials work with donors to better identify and support businesses that elevate people of color?
Business ownership is not equal across groups and communities. Nationally, Hispanic people make up 16 percent of the US adult population but constitute just 6 percent of business owners, and those firms have just 1 percent of revenues. And although African Americans represent 12 percent of the US adult population, just 2 percent of business owners are African American, and those firms have 0.3 percent of revenues.
There are many reasons why this is the case, including the fact that small business owners can struggle to access the financing they need to start and expand their firms. This is especially true in communities of color, who have been historically cut off from capital. Firms owned by people of color also face lower chances of survival.
Overcoming historic inequities in small business ownership will require us to reach deeper. Our recent study reviews Chicago’s Neighborhood Opportunity Fund, a promising new model that creates and grows entrepreneurs in underserved commercial corridors.
We find that the Neighborhood Opportunity Fund, created in 2016, provides the equity that disadvantaged entrepreneurs need and can’t access through other means, as well as high-touch, open-ended technical support.
The program is financed not through the city budgeting process but through new financial contributions by developers who request and receive floor-area bonuses in downtown Chicago. This money is then used to provide competitive grants covering 30 to 65 percent of total costs for real estate improvement development projects that enhance retail or cultural offerings in the community.
The program looks to engage projects that have a catalytic potential for local communities in need of support and in historically underserved neighborhoods. This means providing grants to projects in earlier stages of development and to projects, like start-ups, that otherwise would not be able to access the needed equity.
Read the full article about small businesses battling inequities by Brett Theodos and Jorge González at Urban Institute.
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