New Report Identifies Resources, Barriers for Detroit Small Businesses Seeking Capital
Money Alone Not Enough to Ensure Small Business Success, Report Says
Detroit, Mich. (13 February 2019)– A decade removed from the Great Recession, a new report identifies sources of capital available to new and established small business entrepreneurs in Detroit, Hamtramck, and Highland Park, along with potential strategies to help them more successfully access the capital they need to grow their businesses.
The full Capital Access report, which was commissioned by the New Economy Initiative (NEI) and JP Morgan Chase,is available online HERE.
The Capital Access report was authored by the Eckblad Group, a woman-owned consulting firm that has worked with community development financial institutions (CDFIs) to create microloan programs that support underserved business owners. The report makes three key observations about the accessibility of small business capital in Detroit:
- It is essential that local capital providers take a collaborative, ecosystem approach to ensure that the right type of capital is available to underserved entrepreneurs at the right times.
- Underserved entrepreneurs need support building financial and small business management skills, navigating the capital ecosystem, and building trust in systems that were not originally built for them.
- Coordination at all levels of the small business support ecosystem—from neighborhood organizations to banks—is needed to address structural issues faced by underserved entrepreneurs.
The report is accompanied by a new resource for small businesses, the Capital Readiness Checklist, also available online HERE. A worktable of neighborhood business advocates operating across Detroit, Hamtramck, and Highland Park designed the checklist, which serves as an assessment tool to help entrepreneurs learn the “5 Cs of Creditworthiness” and determine their readiness for loan capital. The checklist has been translated and printed in four languages: English, Spanish, Arabic, and Bangla.
“Detroit is a trailblazer among its peers in addressing the challenges of historically underserved entrepreneurs, but there are still gaps in the continuum of capital that small businesses need to start, grow, and thrive,” said Barbara Eckblad, principal of the Eckblad Group. “The Capital Accessreport gives a snapshot of the state of the continuum today, and the products, tools, and policies needed to make that continuum available and accessible to all members of the community.”
“The New Economy Initiative’s work has been increasingly focused on building businesses from and of our community by investing in strong support systems for local entrepreneurs,” said Don Jones, NEI’s associate director. “The Capital Accessreport gives us a picture of what is needed to ensure that all entrepreneurs can access the right resources at the right time to grow their businesses.”
In 2018, the Eckblad Group researched the sources and availability of capital for new and existing small businesses operating in Detroit, Hamtramck, and Highland Park. The authors also conducted dozens of interviews with entrepreneurs, private- and social-sector financial institution leaders, and representatives of relevant community organizations to explore perceptions of capital availability for entrepreneurs, particularly those that are underserved.
The Capital Accessreport gives capital providers and small business advocates insight into the complex needs of new and established Detroit entrepreneurs, particularly those from underserved communities still aggravated by the effects of the Great Recession. Between 2009-2010, the number of small business loans in Detroit dropped by 60 percent, according to the report. Though lending finally returned to pre-recession levels in 2015, accessible capital remains elusive at the lower stages of the capital continuum, particularly at the microloan level (loans of $50,000 or less).
Three nonprofit organizations – ProsperUS Detroit, Michigan Women Forward, and the Detroit Development Fund – focus on microloan products that are being accessed by small businesses in Detroit, Hamtramck, and Highland Park. Other resources, such as the U.S. Small Business Administration’s microloan program, are available but do not provide a significant number of loans at the microloan level that reach a significant number of businesses in those cities.
“Detroit, Hamtramck, and Highland Park are chock-full of talented, motivated entrepreneurs who wouldn’t otherwise have access to capital if it weren’t for the vigorous network of micro-lenders serving our business community,” said Matthew Bihun, a senior loan officer at ProsperUS Detroit. “Prosper US, Michigan Women Forward, and Detroit Development fund have demonstrated successful lending models that are predicated on a high tolerance for risk combined with creative technical assistance, intensive relationship-building, and the ability to be flexible in areas where traditional lenders may not.”
The Capital Accessreport identifies several opportunities for future research to improve the lending landscape for new and established entrepreneurs in Detroit, Hamtramck, and Highland Park.
“Access to capital continues to be the most limiting factors for minority entrepreneurs when it comes to starting a business,” said Ted Archer, head of Small Business Forward, JPMorgan Chase. “Small businesses are the backbone of our neighborhood economies which is why we continue to support efforts that help pinpoint barriers to economic opportunity and offer creative solutions to bring entrepreneurs the resources they need to be successful.”
“For those who come from neighborhoods or communities that have historically lacked access to money or networks of people who can serve as mentors, there are additional layers of awareness, trust, systems navigation, community-building and institutional bias that must be considered and provided to realize the full force of entrepreneurship,’’ said Barbara Eckblad. “Money alone will not address the resource needs of the underserved in these areas.’’
Read the full Capital Access report here: LINK
Read the full Capital Access report in Arabic here: LINK
Read the full Capital Access report in Bangla here: LINK
Read Don Jones’s blog about the report here: LINK
Access the Capital Readiness Checklist here: LINK
About the New Economy Initiative
The New Economy Initiative is a special project of the Community Foundation for Southeast Michigan that’s working to build a regional network of support for entrepreneurs and small businesses. Its mission is to grow an inclusive culture of entrepreneurship in southeast Michigan that benefits all residents and strengthens the regional economy.Learn more at https://neweconomyinitiative.org/.
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Contact: Heather George, 313 832-2210, 248-417-5773 (mobile), hgeorge@loviogeorge.com