Capital

programs and to develop new initiatives that are open and welcoming to them, and providing critical support as they start and grow new ventures. While many important ecosystem assets are in place, they are not being accessed by Rhode Island’s BIPOC entrepreneurs. These disparities will not be eliminated without the active engagement and direction of these businesses in the processes of identifying gaps and designing effective solutions.

Rhode Island’s BIPOC entrepreneurs are perhaps most vocal in their concerns about their limited capacity to easily access the many sources of business capital available in Rhode Island and across New England. On paper, Rhode Island is a treasure trove of funding sources to start and grow new companies. But the practical reality is that many of these potential funders are not providing resources to support the start-up and growth of BIPOC businesses in Rhode Island. Recent experience with Federally-backed pandemic funding sources is instructive. As of May 2021, Rhode Island businesses had received nearly 15,700 SBA-backed Paycheck Protection Program (PPP) loans with a total value of more than $966 million.3 While detailed demographic information on those who received PPP loans is incomplete, Federal Reserve data suggest that BIPOC-owned firms faced many challenges accessing PPP and Economic Injury Disaster Loan (EIDL) loans during the pandemic.4 Black- and Hispanic-owned firms were less likely to apply for these funds, with a large share of these business owners reporting that they were unaware of programs or faced burdens in applying for the funds. When they did apply, their applications were more likely to be rejected or they were less likely to receive the full amount of requested funds.

The challenges faced in accessing COVID-19 related funds are not unique to Rhode Island; they are commonly found across the US. As Rhode Island’s business and community leaders develop new solutions, they can at least build on a relatively diverse and robust set of potential business funders doing business in the state. Prominent publicly-backed funding sources include RI Commerce’s Small Business Assistance Program, the Slater Technology Fund, and various locally-backed loan funds, such as those operating in Providence, Cranston, and Pawtucket.

While a large number of funding programs are in place, they are often difficult to access by BIPOC entrepreneurs. Additional actions are needed to develop new funding streams and to ensure that existing programs and capital sources are effectively serving all of Rhode Island’s entrepreneurs. First, Rhode Island needs to support the development of home-grown capital pools targeted to BIPOC business owners and to those operating in distressed neighborhoods. At present, Rhode Island has only one CDFI or CDC funder that is headquartered in Rhode Island, the consumer-focused Capital Good Fund.5 RI Commerce should consider supporting efforts to charter a new Rhode Island-based CDFI or to ensure that Rhode Island-based firms can more easily access CDFI resources located elsewhere. This recommendation

3 U.S. Small Business Administration, Paycheck Protection Program Report: Approvals as of 5/21/2021. Available at: https://www.sba.gov/sites/default/files/2021-05/PPP_Report_Public_210502-508.pdf. 4 U.S. Federal Reserve, Small Business Credit Survey: 2021 Report on Firms Owned by People of Color. Available at: https://www.fedsmallbusiness.org/medialibrary/FedSmallBusiness/files/2021/sbcs-report-on-firms-owned-bypeople-of-color. 5 However, a large number of out-of-state CDFIs do include Rhode Island in their service areas.

was also included in Rhode Island Commerce’s Rhode Island Innovates 2.0 report6 and the Rhode Island Foundation’s recent recommendations for State use of American Rescue Plan Act (ARPA) funds.7 Because the process of creating a new CDFI is timeconsuming, intermediate steps should also be considered. The development of the new State Small Business Credit Initiative (SSBCI) program offers a potential opportunity to steer these Federal funds into new capital pools targeted to microenterprises and BIPOC firms. Tapping into philanthropic sources to charter new funds is another option. Northeast Ohio’s JumpStart Focus Fund offers a model for this approach. State leaders should also embrace small business finance recommendations recently made by the Rhode Island Foundation and its partners.8 The Foundation’s recent Make It Happen report advocates that a share of the states’ ARPA funding be deployed to: • Support a Forgivable Loan Program Pool valued at $50 million. • Invest $35 million to enhance technical assistance services for small business. • Invest $10 million to create a new statewide CDFI. • Invest $5 million in a new loan program for certified Minority Business Enterprises (MBEs).

These small business technical assistance services should include mentoring and coaching programs that are culturally connected to the fast-growing immigrant population in Rhode Island. Second, Rhode Island should embrace the burgeoning set of alternative financing tools now in the marketplace. Federal Reserve surveys suggest that a growing number of entrepreneurs, especially those shut out from traditional banking sources, are tapping into new online lenders.9 In fact, online lenders are now the top source of financing for Black-owned businesses. Efforts to encourage the expansion of fintech companies into the Rhode Island marketplace could be helpful, if accompanied by efforts to ensure that interest rates and fees are competitive. JumpStart Inc’s initial mission was straightforward but challenging: build a world-class entrepreneurial ecosystem in Northeast Ohio. JumpStart operates as a venture development organization that provides technical assistance to small businesses and technology companies, supports a regional network of service providers, and invests directly in promising local companies. The Jumpstart Focus Fund provides much needed seed-funding to Ohio tech-based companies that are led by females and entrepreneurs of color. The investment in these companies by the Focus Fund starts around $250,000 and is intended for growth in targeted technology sectors. Beyond the investment, the Focus Fund matches the entrepreneurs with an experience “Venture Partner” to help provide guidance, insight, and experience to help the start-up company achieve their goals.

6 Rhode Island Commerce, Rhode Island Innovates 2.0. See pp. 127-128. Available at: https://commerceri.com/wp-content/uploads/2020/02/Rhode-Island-Innovates-2.0.pdf. 7 Rhode Island Foundation, The Economic Progress Institute and RIPEC, Make it Happen: Investing for Rhode Island’s Future, October 2021. Available at: https://assets.rifoundation.org/documents/RIF_MakeItHappen_SinglePages.pdf. 8 Rhode Island Foundation, Make It Happen, pp. 37-42. 9 Sifan Liu and Joseph Parilla, “New Data Shows Small Businesses in Communities of Color had Unequal Access to Federal COVID-19 Relief,” Brookings Institution Report, September 17, 2020. Available at: https://www.brookings.edu/research/new-data-shows-small-businesses-in-communities-of-color-had-unequalaccess-to-federal-covid-19-relief/.