By Claire Obae
- Shopify invest $1 million in operational funding with its “Build Black” initiative to create one million Black-owned businesses by 2030
- There is a huge disparity in access to credit as banks approved 75% of whites and only 47% for Blacks
Despite their economic importance to the country and their dominance on an international scale, Black-owned businesses face significant barriers when accessing capital from traditional lenders like banks and credit unions. Out of the pool that applied for credit, only 47% of Blacks received funds compared to 75% of whites. Shopify (SHOP -1.94%) is stepping up to fill the gap in pursuit of equitable commerce.
Why This Matters: Even with the Covid-19 pandemic that crippled most businesses, Black-owned businesses seemed to thrive growing at twice the rate of other firms. Financing small local businesses is vital for the health of local economies. It stimulates money circulation, creates jobs, and provides a platform for business owners to actively participate in their local community. However, even though this should be a win-win situation, banks seldom provide adequate funding for small Black businesses.
Shopify is, however, willing to change the narrative. The company announced its Black-owned Business Plan, which is designed to accelerate the growth of Black-owned businesses. The plan will see Shopify invest $1 million in operational funding for qualifying businesses, with its “Build Black” initiative and create one million Black-owned businesses by 2030.
It is no secret that Black businesses are struggling to get access to capital and credit. What is less known is that this lack of access to capital is a major factor in the high failure rate of Black businesses. This means that Black business owners have less money to reinvest back into their companies, which creates a cycle where they cannot grow as quickly as their competitors who don’t have these financial roadblocks in front of them.
What’s Next: Clearly, there’s an equity gap in lending, but it’s not just about money, it’s about opportunity. In the era of innovation and disruption, many entrepreneurs should consider turning to alternative sources of capital. From crowdfunding to peer-to-peer lending. Shopify is putting Black businesses one step closer to building companies that can compete on a leveled playground.
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