Guest blog post written by Eugenia Vivanco, Community Impact & Funding Director, Raza Development Fund (RDF). RDF is a recipient of a Wells Fargo Diverse Community Capital Activator award.
Latino small business owners are the fastest-growing group of entrepreneurs in the U.S. As of 2020, there are 1.1 million minority-owned small businesses, which serve as essential job sources and economic engines in America. These businesses employ more than 8.7 million workers and generate over $1 trillion in economic output. Women own nearly 300,000 of them, employing 2.4 million workers. Also of note, a 2018 study by the U.S. Small Business Administration’s Office of Advocacy found that 10 percent of all business owners in the U.S. are Latino immigrants and their operations generate about $36.5 billion in business income.
Historically, this viable business sector has not had equal access to the range of financial products needed to scale their businesses. Causes of this difference lie in systemic barriers within the banking system that do not accommodate the challenges faced by Latino-owned small businesses. The emergence of the COVID-19 health crisis has exacerbated these challenges, and the economic impact on these small businesses was more pronounced given existing disparities.
As the country’s largest Latino-serving national CDFI, founded 20 years ago with the mission of serving Latino and low-income communities, Raza Development Fund (RDF) recognized the urgency and the need for an immediate response to help Latino and other minority-owned small businesses. With the help of Wells Fargo, RDF was able to repurpose partial funds of the DCC Activator Grant received from Wells Fargo in 2019. The DCC funds aim to help CDFIs lend to diverse small business owners, support initiatives that increase access to capital and resources (such as technical assistance, marketing, and outreach), and help more diverse small business owners get the coaching and education resources they may need.
COVID-19 Hope Fund
Funds from the DCC Activator award were used to launch the COVID-19 (C19) Hope Fund. The program invested almost $700,000 in grants to 111 small businesses in South Phoenix (where RDF is headquartered), Portland, Seattle, and Philadelphia. The program also provided more than 300 hours of technical assistance and deployed almost $1 million in PPP loans in less than one week. Remaining funds from the Activator award continue to be invested in small business-related services beyond providing grants. In addition, RDF is working on serving additional small businesses in both English and Spanish with PPP loans in the current round of funding.
The C19 Hope Fund model takes a long-term investment approach to small business development. A central component of the model is the involvement of local leaders who know minority entrepreneurs in their communities closely, allowing for a trusting relationship to build between RDF and the entrepreneurs. The model is composed of a three-phase program that responds to the immediate challenges of small businesses while also helping them achieve sustainable growth that leads to long-term self-sufficiency.
Recipients of the C19 Hope Fund consist of Latino/a (80 percent), African American (7 percent), and other minority small business owners (with under $1 million in annual revenue and less than 50 employees), and a majority are residents of underserved communities with less than 80 percent Area Median Income (AMI). Overall, 46 percent of grant recipients are female. Additionally, the C19 Hope Fund has supported the retention of 213 jobs. In 2019, these small businesses generated more than $45 million in total revenue, and on average, they have been operating for 12 years and have six employees. The C19 Hope Fund has served businesses in more than ten industries, including food retail (restaurants, cafes, food trucks, and catering), professional services (accounting, marketing, public relations, and website development), and arts and culture.
RDF recently received additional funding that will allow for the expansion and growth of the C19 Hope Fund in more states along with continued support for existing beneficiaries. The program expansion is critical to helping ameliorate minority entrepreneurs’ most pressing concerns and provide the tools necessary to achieve their desired growth. To learn more about RDF or the C19 Hope Fund, or potential partnership opportunities, please contact Monica Ballesteros at email@example.com.