This four-part strategy explains how to level the playing field for all entrepreneurs

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Want to fight inequality in America? Nurturing more diverse entrepreneurs.

This is the main recommendation of the Ewing Marion Kauffman Foundation’s new four-pronged strategy to reduce barriers to entry into entrepreneurship and create new jobs. The Kansas City, Mo.-based, nonpartisan nonprofit organization that works to build entrepreneurship released the proposal, dubbed “America’s New Business Plan for 2022,” in mid- may.

Many groups have already welcomed the plan, including US Black Chambers Inc., a Washington, DC-based organization that works to develop and grow black businesses. “Black entrepreneurs continue to face disproportionate challenges on their journey to becoming a business owner,” Ron Busby, president and CEO of US Black Chambers Inc., said in a statement. Busby continued that the plan “recognizes this fact and proposes state and local coordination to advance Black business ownership across the country.”

Here are suggestions in four main areas that the plan seeks to improve:

1. Access to opportunities

In addition to systemic issues that prevent underrepresented people from launching startups, red tape and other regulatory requirements can also play a role.

  • To help solve this problem, the business plan proposes local, state and federal governments work to expedite the process of starting a new business. This could involve reducing paperwork and fees to simplify local processes for obtaining permits and licenses to start a new business.
  • The plan further suggests expanding access to the digital economy, for example by increasing access to broadband networks, which can help people living in areas without strong internet access.

2. Access to finance

Access to capital remains a common barrier for entrepreneurs, according to the Kauffman report. Eighty-three percent of entrepreneurs do not have access to bank loans or other forms of capital, such as private equity, when starting a business.

  • Kauffman’s strategy points to a 2020 report from Brookings, which shows the median net worth of a white family was $171,000, compared to $17,000 for black families. The plan suggests tackling inequality early on with the creation of a “baby bond program,” where investment accounts are created for newborns by the federal government – ​​the amount of the grant would scale with the overall wealth of a family, in which a low-income family would receive a larger subsidy. The idea here is to start young so that the playing field is leveled for future founders.
  • Community Development Financial Institutions (CDFIs) and Minority Depository Institutions (MDIs) are important resources for new and small businesses, especially in low-income communities. Removing some of the capitalization challenges faced by CDFIs and MDIs, as well as expanding community deposit programs, could spur greater investment in communities.
  • Ask Congress to make permanent the State’s Small Business Credit Initiative, a funding program that aims to expand access to capital for underserved communities. And modernizing the Community Reinvestment Act could also boost entrepreneurship. This law prevents redlining and encourages banks to lend to those of all income backgrounds within their communities. Banking regulators are currently working to reform the law, proposing, among othersto accommodate advancements in banking (think online and mobile banking) and provide greater clarity for community assessments to ensure banks are meeting their access to credit obligations.

3. Access to knowledge

Good business education can also pay dividends.

  • Kauffman suggests starting by investing in schools (traditional and vocational) to allow students to explore different avenues, for example through work-based learning.
  • Policy makers can intervene by offering incentives to mentor resource partners. This could help increase the number of entrepreneurs from underrepresented backgrounds. Mentoring improves the chances of stronger job and revenue growth for business owners, according to the plan.

4. Access to support

Taking the leap to become an entrepreneur involves unprecedented risk, but having a strong support system (and access to that support) makes that risk easier to bear. Expanding access to caregiving options, health care options, and offering student debt relief are some suggestions on how to support those dealing with other stresses of daily life.

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