Worcester Business Journal

6 Worcester Business Journal | March 20, 2023 | wbjournal.com is is noticeable on the ground, said Francisco. "We need to figure out how we can actually realign those strategic promises," she said. Dianne Austin, CEO and co-founder of Boston-based Coils to Locs, runs a wig company for cancer patients who, like Austin when she was undergoing treatment, want wigs in the same style as their natural very curly hair. Austin found herself unable to find the quality wigs in her hair type available for patients with straight hair. Austin said she has faced systemic barriers in getting the kind of financing she has hoped for. While she has had success in accelerators for BIPOC (Black, indigenous people of color) business owners and received grants specifically for businesses owned by people of color, they have largely been small grants. uphill battle. Curran has conducted her first two cohorts without any external funding for her business and said with her third cohort she is hoping to gain enough revenue traction to be eligible for financing STEM ENRG has been too narrow for thus far. "ere are customers out there willing to pay and a need and a desire for this program," said Curran, citing the hundreds of applications she has received for 20 slots in the cohort. "e challenge is finding operating capital to invest in things to get to the next level." e racial reckoning in the U.S. begun in 2020 spurred businesses across the country to make commitments to diversity and inclusion. For investment firms, this came in the form of promises to be more equitable in financing business owned by minority groups. Yet much of that fervor has reverted to pre-2020 levels, according to Morgan Stanley's 2022 report "Social Equity and Funding Gaps." In 2020, 43% of VCs said finding opportunities with multicultural-founded companies was a top priority for their firm. In 2022, that number fell to 32%. Hurting for financing BY ISABEL TEHAN WBJ Staff Writer W hen Katherine Aguilar started her business with $300 on an ex-boyfriend's credit card, she did not have a plan for how she would sustainably fund her endeavor to open the first plastic-free gi shop in Worcester. Now four years later, financing the growth of Kommon Sense Co., which specializes in locally and ethically sourced gis while educating consumers about reducing their carbon footprints, has been a trial- and-error process. "It would be nice if we had a roadmap or a guide for how to do this," said Aguilar. Aguilar is not alone on the confusing road to financing a small business, made more winding for business owners of color who remain disadvantaged in the world of large loans and venture capital, despite increased awareness of inequities. Small grants have been enough for Aguilar's tiny team, made up of herself and two seasonal employees, but other startups seeking out larger investments have come up short, in large part because the deck is stacked against them. Betty Francisco, CEO of Boston Impact Initiative, a nonprofit investment fund focused on economic and racial justice, is one voice in the state bringing awareness and making strides to address the gaps causing minority startup entrepreneurs to have less access to capital. Francisco began her career as a corporate lawyer focused on deals related to transactions. In the eight years she worked in that role, she saw what she called a significant lack of representation among investor firms. "I didn't see people who look like me," she said. While Francisco watched opportunities appear for entrepreneurs, few were focused on people of color. She shied careers to her role now at BII, where she channels her passion for helping women- and person-of-color- owned businesses. e BII pilot fund, which only focused on Boston-based and Eastern Massachusetts businesses, is expanding, now on its third and largest financing round yet. Francisco said the next available round of funding, amounting to $20 million, will be available with a focus on immigrant populations outside of Boston growing and starting businesses. In Worcester, the fund is looking to build relationships with Latino-owned businesses. Francisco credits COVID-era grants as helping small businesses stay afloat and manage their expenses. "But they only did just so much," she said. "ere is a need for much more money to stabilize and grow." Reduced priority on multiculturalism Shawna Curran, founder and CEO of STEM ENRG, a Worcester company running a cohort-based training program teaching coding, project management, and financial literacy for women of color, has acutely felt the pandemic-era grants and loans were not enough. Since Curran's business was not solidly established before the pandemic, the recovery funds did not apply to her, and finding funding now has been an Small businesses run by people of color are struggling to find funding, as VCs' priorities have shied away from providing opportunities for multicultural businesses Overall Loans from small banks Loans from large banks Loans from fintech lenders 8.6% 3.3% 7.8% 26.5% PPP loans to Black-owned businesses Percent of Paycheck Protection Program loans going to Black-owned businesses nationally Source: New York University 2021 study, "Racial Disparities in Access to Small Business Credit" Betty Francisco, CEO of Boston Impact Initiative Dianne Austin's Coils to Locs started as a pilot program in 15 hospitals.

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