Starting a business is challenging. Access to capital, financial literacy and unsatisfactory credit are just a few of the key barriers to success for many young entrepreneurs. The access to capital barrier, due to racism and systemic bias in the current financial system, along with business financial literacy are particularly acute for young Black entrepreneurs.
According to the Government of Canada’s fall 2020 consultations with the Black entrepreneurship community, “The issue of access to capital was identified by many participants as the most important issue for Black entrepreneurs. Participants noted that access to capital is crucial for any entrepreneur and that Black entrepreneurs have more difficulty than other entrepreneurs accessing capital.”
This is one of many statements about financing barriers faced by Black entrepreneurs from organizations, including Government of Canada, BDC, Canadian Black Chamber of Commerce, and others. Unfortunately, there is sparse data about the extent of this capital barrier, as most institutions do not collect demographic data about borrowers or credit eligibility.
In October 2020, Futurpreneur began collecting data about the barriers faced by our entrepreneurs in different communities, and the findings related to credit barriers are stark. Within the first three months of collecting data, only 17% of all entrepreneurs identified “bad credit score” as a barrier to their success; however, 31% of entrepreneurs who identify as Black identified “bad credit score” as a barrier—more than twice the 15% response rate of entrepreneurs who identify as White.
This is why, alongside mentorship and other supports, our Black Entrepreneur Startup Program includes more inclusive financing criteria for Black entrepreneurs, recognizing and addressing the impact of systemic credit barriers to their business success.