Kweli is an artist, advocate, and small business owner in the San Francisco Bay Area in California. She integrates creative exercises into leadership training workshops to help social justice advocates build personal and professional skills. Before the pandemic, she conducted all her coaching sessions in person. Now, she’s found innovative ways to host creative workshops online to support leaders. As Kweli says, “I’ve had to adapt the narrative around my business. I’ve learned that you have to be super adaptable and flexible.”

COVID-19 has strained the global economy, and micro, small, and medium enterprises (MSMEs) have been among the hardest hit. In the United States, the pandemic — coupled with issues of racial injustice brought to the fore by the Black Lives Matter movement, and the U.S. presidential election — has led to historic levels of uncertainty.

The unpredictable nature of this crisis has only exacerbated issues that already plagued small business owners in the U.S., like Kweli. Even prior to the pandemic, small businesses struggled to get the financing they need, and now that issue has been exponentially magnified. Entrepreneurs of color, especially, have long faced challenges with systemic racism and other forms of inequality in the U.S., hampering their ability to start, grow, and sustain their businesses. According to a Brookings Institution study, in 2018, large banks approved 60 percent of loans sought by white small business owners, but only 50 percent by Latinx owners, and 29 percent by Black owners.

Accion Opportunity Fund (AOF), Accion’s primary presence in the U.S., is a nonprofit working to create an inclusive, healthy financial system that supports American small business owners. Through innovative partnerships and outreach strategies, AOF targets underserved communities — including entrepreneurs of color, low-income entrepreneurs, and women — who often lack access to the financial services they need to build their businesses.  AOF realized that the challenges small business owners are facing due to the pandemic called for new innovative products focused on bolstering the resiliency of these businesses. To support these business owners as they stabilize, transform, and grow their business offerings, Accion’s Global Advisory Solutions is working with AOF to solve the specific pain points and challenges of these entrepreneurs.

Using a human-centered design methodology, Accion and the AOF team recently completed a series of interviews with people of color who own businesses in Los Angeles and Houston. Our objective was to better understand how they came to be business owners, the challenges they face, what they want from their financial service institutions, and what tools and resources they need most to continue running their business.

The key insights from these conversations included:

Implicit and explicit biases have created an uneven playing field for entrepreneurs of color

One of our interviewees, a Black woman who owns two salons and a small restaurant in southern California, summed it up well: “We are always starting with two feet behind.” Bias is not experienced in the same way by different people — being a woman, a person of color, or an immigrant creates different challenges that require additional effort and resilience to overcome. Multiple interviewees told us that they found relationships with their financial institutions one-sided and disempowering. Immigrants with limited credit history face barriers to access financial services, and often have a hard time finding information in their language.

As financial service providers across the U.S. think about how to design better financial products to address such challenges faced by women and people of color, they must acknowledge the pervasive systemic discrimination affecting these populations and work to remove bias from their processes.

COVID-19 has exposed gaps in how small business owners handle crisis

While all small business owners are dealing with a tremendous amount of uncertainty, individual entrepreneurs are reacting to the crisis in various ways. While some of the more proactive have taken immediate actions, like pivoting their business or moving online, others need more support to better understand their options and determine the best course of action for their business. One entrepreneur told us, “Everything happened so fast, I didn’t even have a chance to get ready.”

Despite the challenges put upon small business owners, their entrepreneurial spirit continued to ring strong. We never heard an entrepreneur tell us they want to close their business and consider a salaried job. Most entrepreneurs feel confident in their ability to ‘figure things out,’ but also shared that they actively seek out advice from peers and experts. In fact, we learned that inner circle relationships are highly influential in their decision making.

To support entrepreneurs on both sides of this spectrum, financial service providers should avoid adding complexity to small business owners’ lives and design products that are simple to understand and convenient to access. They should design for the entrepreneurial spirit and leverage small business networks and experts for information sharing to support small business owners throughout their entire journey — not just when they need financing.

The small business owner is the business

All of the entrepreneurs we spoke to define themselves as small business owners. These entrepreneurs infuse their personalities, values, and worldview into their business. One person told us, “I don’t have anything against people that work in corporate America, but I love to be a business owner.” Their businesses have evolved and grown only as they personally have learned and acquired more experience. Their individual values determine how they run their businesses and interact with their employees.

Financial service providers should ground the design of their offerings in the strong identity of small business owners and encourage a sense of empowerment for these individuals. They can do this by building greater trust with customers and eliminating bias from any decision-making processes to build strong and lasting relationships.

Accion and Accion Opportunity Fund are incorporating these insights into the design of innovative solutions that will enable AOF to help small businesses in the United States build their resiliency to this crisis and any future shocks. The need to acknowledge and actively work against the systemic biases that disproportionately impact small business owners who are women, immigrants, and people of color is clear. We know that small business owners want to stabilize and grow their businesses so that they can accomplish their long-term goals. Financial service providers in the U.S. have a huge opportunity to partner with these entrepreneurs along their small business journey through the design of more relevant and meaningful financial products and services.

To learn more about Accion Global Advisory Solutions’ work in the U.S., or if you would like to work with us to better serve your small business clients, please contact us.