Local chef Kamesha McDaniel has big plans for growing her business, Detroit Green Carrot. However, taking her catering company to the next level is going to take more than a vision. She needs capital for her big plans, and for African Americans and other minority business owners in Detroit, there are big challenges to getting the support and funding they need.
"Sometimes it seems like it's impossible to get money. I don't exactly why, but capital is just not as accessible to African American business owners," McDaniel says. "I know that I can get the money I need if get to the right door and if the gatekeepers open the doors and let me in."
Before she officially opened Detroit Green Carrot in 2017 McDaniel had been doing business selling food from her car. Today, her business is registered, and while she doing well, the pandemic has meant that she's had to look at ways to expand and pivot. She's branched out into providing workshops and culinary education for individuals with significant disabilities. Having more funds will allow her to offer more services and perhaps even provide a way to help some of her clients with their transportation needs.
"The pandemic made things more of a struggle," she says. "I know that I'll get what I need because I am persistent, but it takes a lot of hard work and the reality is that a lot of Black business owners are shut out of opportunities."
When the pandemic first took hold, TechTown's
Marlo Rencher found herself witnessing a similar scenario unfold again and again.
"Black-owned businesses were being decimated," says the director of technology-based programs at TechTown, a Detroit-based nonprofit that helps tech startups and local businesses launch and grow.
Kamesha McDaniel working with her son Barron at a recent popup at Detroit City Distillery. Photo by Nick Hagen.
To help mitigate losses for what they recognized as "Detroit's most vulnerable businesses and entrepreneurs" TechTown administered an emergency fund in 2020 to provide working capital grants in amounts up to $5,000.
Rencher, who was in the trenches trying to help businesses access financial relief amid the pandemic, said that while some Black-owned and minority-owned businesses were able to successfully pivot and are stay afloat, many are barely treading water today or have had to close shop altogether.
"We need to recognize that Black-owned businesses and minority-owned businesses were hit and were hit hard. Many were knocked so far off balance that there is no recovery for them," Rencher says.
Challenges and solutions
For Rencher, the need for more support and access to capital funding for Black-owned and minority-owned businesses is nothing short of urgent. Such businesses are often underserved and it's likely that they did not have a great deal of capital to begin with.
She's not alone in her conviction. According to Detroit Future City (DFC)
CEO Anika Goss, steps must be taken to protect the future of African American and Latino businesses, particularly because they are growing much slower in comparison to White- and Asian-owned businesses that are based in Detroit.
Goss points to information uncovered through her organization's State of Economic Equity in Detroit
report, released in 2020. The report supports a vision for an economically equitable Detroit and presents baseline data, by race/ethnicity and geography, with 22 economic equity indicators across six focus areas, one being business and entrepreneurship.
"We know that Detroit ranks one of the highest in the country in terms of entrepreneurial start-ups," she says. "But, what we have come to realize more recently is that African American businesses and Latino businesses, in particular, are not growing. They tend to start up, but then they're not growing.
Goss adds that the State of Economic Equity
report identified credit as one of the largest barriers.
"Access to capital is often directly connected to credit and lack thereof, or collateral and lack thereof," she says. "It's something we need to be concerned about."
Through some of the funding mechanisms in place at TechTown, Rencher is teaching business owners to be more strategic. Building a credit history is a big focus. The support helps business owners eliminate the barriers to obtaining loans and sets them up with skills for growth.
"When you're first coming out the gate, maybe you can get a microloan of $5,000," she says. "Can you demonstrate that the revenue from your business will allow you to pay off that loan? Can you build up to $20,000, and so on and so on?"
This type of support is crucial, says Chanell Scott Contreras, executive director of ProsperUs
, a minority-led nonprofit that provides low-cost entrepreneur training, business services and micro-lending to low- and moderate-income minority entrepreneurs.
Over the last 10 years, ProsperUs has made approximately 115 loans and deployed about 2.3 million dollars in capital to support to over 400 businesses in the community. McDaniel, who participated in their program in 2017, is one of 1300 entrepreneurs who have been served through their training program. She recalls that even despite having a business degree prior to connecting with ProsperUS the experience of trying to get capital was always an uphill battle.
"I didn't know how to actually go about getting a company started and all the finer details," she says." ProsperUs helped me lay out a plan, clear my credit and get all my paperwork in order so that I could establish a business credit line and become successful."
Scott Contreras explains that entrepreneurs working, living and opening a business in a low-to-moderate-income community often don't have enough personal income to be able to save enough to invest in the business, and are less likely to have families' and friends' money that can be borrowed or invested. She stresses that access to capital is so important, yet so difficult to obtain for these entrepreneurs, especially from traditional sources.
"There are so many minority business owners who struggle, largely due to systemic issues. Traditional mechanisms that have traditional ways of evaluating creditworthiness means a lot of people are left out of the equation," she says. "Mainstream systems don't offer the assistance needed to help entrepreneurs get ready to provide the assurances that a traditional lender might be looking for."
This, according to Scott Contreras, is where community development financial institutions and Detroit's small business ecosystem can step in to help people with the support that they need to be in better positions for business success.
"We've seen time and time again that when these business owners get the capital they need to not only sustain but to grow, it helps our neighborhoods become more vibrant and everyone benefits," she says. "It's important that we support our Black businesses throughout the city and create opportunities for them instead of taking them for granted."
‘No longer back-burnered’
Wafa Dinaro, executive director of the New Economy Initiative (NEI)
, says there’s not enough support for minority-owned businesses, particularly micro-businesses with under 10 employees. And while there's been a growing awareness of the gaps in needed support, the pandemic put the spotlight on some long-standing issues.
"Over the last two years, issues with the PPP program brought to light that it was the small businesses that had access to accountants and that had existing relationships with banks that were able to access those programs," she says. "Meanwhile, the Mom and Pop shops were really left out of that first round of help."
Dinaro is hopeful for the future and thinks that the pandemic has spurred much-needed conversations. She's observed that more policy-makers have started looking at how they can support Black and minority-owned businesses, and organizations like NEI are continuing to push the Michigan Economic Development Corporation and the Michigan Department of Labor and Economic Opportunity to think about small businesses when they are investing and allocating federal dollars.
"The data shows that small businesses really have a big impact on the local economy and make our city what it is. They employ more people and they are what brings people in to live and shop," Dinaro says. "When you look at communities holistically it's the small businesses that are really the bloodline of the Main Streets."
What also needs close examination is how equity can be established and the need to close the wealth gap between Black and White households.
"If a Black business owner actually owns the building that they are in, now they are bringing wealth not only to their family but their community. And they are usually in the communities where they live so you can see that return on investment in the area," says Charity Dean, president, and CEO at the Metro Detroit Black Business Alliance (MDBBA)
There's so much that is lost as a state, as a region, and as neighborhoods and communities when Black-owned businesses cannot access wealth, she says. And to understand what is needed for an equitable economy, it's important to learn about the country's history and the importance of closing the wealth gap between White and Black families. The latter issue is something that Dean’s organization is committed to resolving.
"A lot of times we want to skip over history, but when compare things in context, you see that it's 300 years of discrimination that were trying to fight against," Dean says. "Research from the Kellogg Foundation states if the racial wealth gap in the state of Michigan is closed, the state stands to gain $92 billion by 2050. It's an economic imperative, yet urgency lacks."
For McDaniel, fighting for the same opportunities might be necessary right now, but she's hopeful that change will happen.
"Having to find alternate routes to success is what we, as a people, have done over time," she says. But, there needs to come a time when Black businesses are no longer back-burnered."
Jaishree Drepaul-Bruder is a freelance writer and editor currently based in Ann Arbor. She can be reached at firstname.lastname@example.org.