Black female entrepreneur checking customer orders on mobile phone.
Companies providing subsidies to black entrepreneurs faced uncertainty and loss of financial support due to lawsuits filed challenging the premises of these subsidy programs. But Hello Alice is going strong and has just closed a Series C funding round. Its resilience is also evidenced by amicus briefs filed in the U.S. Equal Employment Opportunity Commission (EEOC) and Southern Poverty Law Center (SPLC) cases.
Hello Alice uses an effective model proven by Community Development Financial Institutions (CDFIs). This success highlights the critical role that combining know-how and subsidies can play in driving economic growth for underrepresented communities such as black entrepreneurs.
While some may oppose efforts to close the entrepreneurial wealth gap, relying on legal obstacles ultimately supports economic growth, job creation, and the development of innovative products that meet the needs of emerging markets. This will hinder the These tactics, supported by a vocal minority, run counter to the interests of the majority, which benefits from a more inclusive and prosperous economy.
Activist legal group challenges racial equality efforts
America First Legal (AFL), led by Stephen Miller, is suing Hello Alice, and American Alliance for Equal Rights (AAER), led by Edward Blum, is suing Fearless Fund. Both lawsuits challenge efforts to promote racial equity by providing grants to Black entrepreneurs. The case hinges on Section 1981 of the Civil Rights Act of 1866, a post-Civil War law enacted to prevent contractual discrimination against formerly enslaved people.
It may not be important to win the lawsuit. According to Bloomberg News, Blum said it’s not surprising that investors have pulled out of Fearless funds. “No investor wants to participate in a business activity that is likely to be determined by a court to be discriminatory and illegal,” Bloom said in a statement.
Hello Alice and the Fearless Fund initially experienced immediate backlash among investors and grant program sponsors, and launched costly legal defenses. These diverted funds could have been used to support financial inclusion efforts.
But a few months later, Hello Alice raised Series C funding with QED Investors, Mastercard, Backstage Capital, Guy Fieri, Golden Seeds, Harbert Growth Partners Fund, How Women Invest I, Lovell Limited Partnership, and Tyler “Ninja” I was able to complete the round. Jessica Blevins, Tamera Mowry, Adam Housley.
This funding will support the expansion of Hello Alice’s small business lending services and AI-powered financial health tools. The fintech platform serves 1.5 million small business owners, and to date he has provided more than $40 million in grants.
In February, the EEOC, which is not a party to the lawsuit but is the government agency that enforces laws that make workplace discrimination illegal, filed a court brief in support of Hello Alice. The EEOC argues that its guidelines permit voluntary affirmative action programs in private investments and that recent Supreme Court decisions regarding affirmative action do not apply here.
“that [the amicus brief] “Sixty-four percent of net new jobs in 2024 will be in small businesses,” said Elizabeth Gore, president and co-founder of Hello Alice.Decline in the ability of small and medium-sized enterprises to raise funds, which is a big risk [for the economy]”
Late last year, the Lawyers’ Committee for Civil Rights Under Law and the SPLC filed their first amicus brief in support of Hello Alice.
The damage has already been done. Defending these lawsuits distracts millions from efforts to promote financial inclusion.
Hello Alice and CDFI: Supporting Inclusive Entrepreneurship
Hello Alice’s approach to supporting inclusive entrepreneurship is similar to that of community development financial institutions (CDFIs). Both offer access to grants and affordable financing with the expertise to ensure your business’s success. CDFIs are backed by humans, while Hello Alice is backed by AI-driven financial health tools. Like CDFIs, Hello Alice provides grants to all small businesses, but to groups with the greatest wealth disparities, including Black, Latinx, Indigenous, LGBTQ+, rural, urban, and veteran communities. also provides grants. These communities face disparities that make it difficult to successfully launch and grow a business.
Grants provide initial funding to overcome obstacles and avoid predatory lenders. Know-how gives you the knowledge to effectively manage your finances, build your creditworthiness, and navigate future financing opportunities. This combined approach helps SMEs build a strong foundation for sustainable growth and economic empowerment.
Over the past 30 years, CDFI has proven this formula works.
“We are thrilled to be working with the Local Initiative Support Corporation (LISC),” said Michael Pugh, president and CEO of Local Initiative Support Corporation (LISC). It is the nation’s largest nonprofit community development financial institution (CDFI), connecting capital and expertise to historically underserved communities. “It is essential that we think about how we can foster economic growth and employment.”
Black women-owned businesses are one of the fastest growing segments. “The skill set and idea to start a business may be very high, but the resources are lacking,” Pugh said.
Decades of discriminatory policies, including loan denials, unfair wages, and housing redlining, have significantly hindered Black families’ ability to build wealth. Black women have an even harder time because they are often the heads of households and face persistent wage disparities. Restricted access to capital and inherited wealth further impedes the ability to save and invest, perpetuating cycles of economic inequality.
To add insult to injury, the Federal Reserve’s 2021 report reveals troubling new disparities in loan approval rates. Black-owned businesses, even those with lower credit risks, were less than half as likely to receive full approval as white-owned businesses with similar creditworthiness.
“What would be useful? [to entrepreneurs] To start or grow a business, you need to be patient and have some capital in your business [long-term investment, in the form of debt or equity, where sustainable growth is prioritized alongside financial returns] If not, you don’t have to pay it back,” said Joyce Klein, director of the Aspen Institute’s Business Ownership Initiative. Aspen is committed to a free, fair, and equitable society, and BOI advances innovation, scale, and impact in America’s small business sector.
Black entrepreneurs often don’t have friends or family members with the personal assets or wealth to provide that funding.
Unfortunately, without grants and patient capital, Black women entrepreneurs can fall prey to predatory lenders and become trapped in high-interest debt that inhibits their ability to grow their businesses. Psychological strain can further discourage people from pursuing entrepreneurial opportunities and widen the racial wealth gap.
“Borrower protections need to be in place so that borrowers understand what they are getting into, can make good choices, and are not exposed to predatory practices,” Klein said. Stated. Connecting with reliable, affordable financing is key, like Hello Alice or a CDFI.
“If these companies get the support they deserve, we’ll start to see a broader ecosystem of job growth and an improved tax base,” Pugh said.
If Black/African American women-owned businesses achieved the average revenue of men, they would add $1.5 trillion in revenue to the U.S. economy. The Impact of Women-Owned Businesses at Wells Fargo in 2024: Focusing on Black/African American Women. *
Do you know where to turn if you need a loan for your small business?
