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VIEWPOINT: Entrepreneurs need more access to capital now

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Renata B. Kowalczyk

Small businesses drive our national economy. According to a 2018 U.S. Small Business Administration report, 30.2 million small businesses employed 58.9 million individuals or 47.5% of the working population. Every entrepreneur should be able to do business within an ecosystem that supports the conditions needed to envision, start and grow a small business. Unfortunately, that is not the case for too many of our neighbors here in Delaware. Wilmington Alliance and Cornerstone West CDC are partnering to change this.

According to the Kauffman Foundation’s “The State of Access to Capital for Entrepreneurs”, the existing capital market structure does not support most entrepreneurs. About 83% of nascent entrepreneurs do not access bank loans or venture capital. In fact, almost 65% rely on personal and family savings and nearly 10% use personal credit cards as startup capital for launching their business. The research also found that Black entrepreneurs begin with almost three-times less startup capital ($35,205) as their white counterparts ($106,720). Black entrepreneurs are also three times less likely to be approved for a conventional business loan.

While successful business ownership can lead to building wealth, obtaining upward economic mobility can be challenging when an entrepreneur enters the ecosystem already at a disadvantage. According to the 2020 Prosperity Now Scorecard, many small businesses operate from a financially vulnerable state, having low cash reserves and limited access to capital.  Coupled with the fact that many micro-businesses with less than 10 employees often intermingle business and personal finances, these entrepreneurs were woefully unprepared for the economic repercussions of a crisis of the magnitude of a global pandemic.

In 2020, Wilmington Alliance joined the City Inclusive Entrepreneurship Network (CIE) through the National League of Cities. This prestigious national program asks city leaders to commit to creating the right policies, programs, and practices to ensure their communities can thrive in the global, innovation-driven economy. For the first year, the Alliance selected providing entrepreneurs resources to grow as its first commitment. Out of that commitment the Wilmington Kitchen Collective was born – Wilmington’s first shared commercial kitchen, with seven entrepreneurs in the current cohort.

During the same year, Wilmington Alliance and Cornerstone West CDC partnered on the development of the Wilmington Strong Fund to support small businesses recovering from the economic effects of the COVID-19 pandemic. To date, the Wilmington Strong Fund has awarded over $300,000 in microgrants to small businesses citywide to cover specific expenses such as rent and mortgage payments, utility and supplier bills. The fund helped to infuse needed emergency capital to assist local businesses recover, but in working with these businesses what has become increasingly clear is that there is still a need for more. 

In 2021, Wilmington Alliance committed to a second year of the CIE by selecting building a microlending platform as their next project. After submitting a successful application to the National League of Cities, Wilmington Alliance was selected to establish a Kiva microlending platform in Delaware to support economic growth and help entrepreneurs raise capital through equity crowdfunding. The Kiva crowd-lending product offers loans between $1,000 and $15,000 with no interest, no fees and extended grace periods.

As the world’s first personal micro-lending website, Kiva enables everyday people to lend as little as $25 to provide financial access to entrepreneurs in developing communities across the globe. Entrepreneurs apply directly to Kiva’s U.S. site to fundraise on the platform and are connected to millions of Kiva lenders to raise up to $15,000, with no interest and no fees. It also enables local lenders to make direct loans, as little as $25 to entrepreneurs in their neighborhoods. Since 2019, Kiva Hubs have expanded from two programs to over 40, helping applicants in the United States access more than 7,500 loans. In total, Kiva has loaned over $44 million to small businesses across 47 states.

Wilmington Alliance and Cornerstone West CDC are partnering to bring Delaware’s Kiva Hub to life. Kiva is a solution that addresses the Kauffman Foundation’s findings that the current access to capital ecosystem does not fully support underserved entrepreneurs. This new partnership will expand access to capital through both the Wilmington Strong Fund’s microgrants and through Kiva Delaware’s microloans. Thus, leveraging small business ownership as a means to reduce income inequality and provide greater financial security to residents in the city of Wilmington and throughout the state.

To learn more or to donate, please contact Mary Easley at delaware@local.kiva.org. 

Renata B. Kowalczyk serves as CEO of Wilmington Alliance and Sara Lester serves as CEO of Cornerstone West CDC.

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