New Report! Gaps and Opportunities: Supporting Boston’s BIPOC Small Businesses

Boston’s Small Business Service Providers Call for Focus on Capital, Contracts, Cultural Competency, & New Approaches to Mitigate Displacement of BIPOC Businesses
Boston University Releases Findings from Survey of Boston’s Ecosystem of Small Business Providers

While Boston’s population is majority-minority, its small business community is not reflective of its diversity. In the wake of the pandemic, small business owners of color in Boston and across the country were particularly challenged and had greater difficulty accessing federal funding resources meant to forestall closures and economic hardship. In recent years, a network of organizations and funders who seek to close racial gaps and grow wealth and power among business owners of color has grown and strengthened rapidly in the Boston area.

The Boston University Initiative on Cities, with the support of The Rockefeller Foundation, today released a new report, “Gaps and Opportunities Supporting Boston’s BIPOC Small Businesses: A Survey of Service Providers,” which captures small business service providers’ views on the most salient challenges confronting Boston’s Black, Indigenous, and people of color (BIPOC) small business owners and entrepreneurs, and their priorities for the future. The report draws on 30 in-depth survey interviews, conducted between November 2021 and February 2022, with leaders from the ecosystem of organizations that are focused on supporting the growth of BIPOC small businesses. The report also juxtaposes the viewpoints and priorities of Boston’s ecosystem against America’s mayors using findings from the national Menino Survey of Mayors.

“Much of what we learned through the survey reinforces what is already known, but the findings bolster the case for more local efforts in areas like procurement for addressing racial disparities in small business,” said David Glick, co-author and Associate Professor of Political Science at Boston University. “We hope policymakers walk away from this report with the three “Cs”: the Capital access gap, rising Commercial costs, and Contracts. Continued action on these issues by the new administration and the ecosystem of service providers can help set up Boston to be a leading example for other cities.”

The Capital Access Gap
Overwhelmingly, members of the ecosystem point to the challenge of accessing capital as a major barrier for businesses, and one that disproportionately burdens small business owners of color. Over 90 percent of participants believe that access to capital is a bigger challenge for BIPOC-owned small businesses than for white-owned ones. Lack of personal assets, credit scores, limited “friend and family” resources, and lenders’ racial bias are perceived as the major contributors to this inequity. Participants noted these as systems level flaws rooted in systemic inequities and historical discrimination. Two-fifths believe the business consequence of this capital access gap is “failure to grow,” and a similar number believe it leads to owners taking on “risky or unwanted debt.” Almost universally, providers say Community Development Financial Institutions (CDFIs) will be “essential” to closing the capital access gap. However, it was the ‘big banks’ participants deemed most essential, suggesting the need to focus on commercial bank practices and enlist them to work alongside the rest of Boston’s ecosystem to close the capital access gap.

Rising Commercial Costs
Half of participants also raised commercial real estate costs as a looming challenge for small businesses in Boston. Two-thirds of participants believe commercial real estate costs are an even greater challenge for BIPOC owners, relative to white owners, suggesting this as an area that deserves greater scrutiny among those who support BIPOC businesses. The view from Boston was notably in contrast to the view of mayors of major American cities, suggesting commercial costs are a more acute problem here than elsewhere. It is an area where Boston could be a leading innovator in programs and policies to mitigate small business displacement and grow asset wealth.

Contracts
As other reports have highlighted, procurement is a key source of inequity in Boston. Over 90 percent of respondents believe the City of Boston’s procurement practices are inequitable. While not a new challenge, a number of participants called on the City both to change its own practices and to use soft power and policies to influence the procurement practices of major employers in Boston.

Whose Problem?
Boston benefits from an extraordinary number of service providers devoted to supporting BIPOC-owned businesses. Via this project, 54 providers were identified, including those focused specifically on the region, and those with a broader footprint but a significant local presence. When speaking to their own strengths and challenges, members of this ecosystem felt that Boston benefits from an extraordinary degree of inter-organizational collaboration and understanding of the unique challenges facing BIPOC business owners. Yet, they still highlighted the need for more coordination, and less duplication, of services.

While the many players of Boston’s ecosystem are integral, there is widespread agreement that the City of Boston is a crucial player with considerable influence over small businesses generally and the state of BIPOC-owned small businesses in particular. Ecosystem members also shared a range of changes they would welcome from the City, including more equitable and transparent procurement practices, streamlined permitting, enhanced communication, and increased direct funding. They expressed a desire for greater investment by the City with particular BIPOC entrepreneurs, including women, immigrants, and people with criminal records such as returning citizens, and an emphasis on cultural competency among those working directly with business owners of color. A number of participants voiced hope that Boston was making progress, and that new leadership in City Hall would bring fresh attention and perspective. They also noted local government need not solve all these problems themselves, but rather has an opportunity to create sustainable funding to outsource technical assistance and other tailored programs to trusted community partners.

“Boston’s BIPOC-owned businesses should be equally reflective of the city’s diversity, better contributing to the vibrancy of the economy and the community. Currently, this is not the case,” said Gregory Johnson, Managing Director of the Equity & Economic Opportunity initiative at The Rockefeller Foundation. “We are excited about the release of this report and hope that it helps set the framework for Boston to be a model for other cities to intentionally address their shortcomings in supporting BIPOC businesses.”

Additional findings and the full report can be found here.