What to Expect During We Rise: Business Finance
Business finance is important for any entrepreneur to understand, but understanding the system is especially important for the Black, Indigenous, people of color (BIPOC) community. Black entrepreneurs are three times more likely than white entrepreneurs to have their profitability and growth hurt by lack of access to capital. They are more than twice as likely as their white counterparts to have profits negatively impacted by the cost of capital.
The business finance portion of the We Rise Accelerator Program focuses on three main topic modules: personal finance; debt, equity, and grant financing; and understanding credit and creditworthiness. The purpose of these modules is to expose entrepreneurs to different financing options for small businesses -- including the less familiar ones like equity and grants -- and to come together to develop strategies to improve both their personal and business creditworthiness.
Personal Finance
Black entrepreneurs often rely on their personal savings to bootstrap their ventures. In this module, learners are introduced to personal finance through financial psychology as well as building and implementing a budget. The purpose of this module is for learners to understand how to manage their personal finances in a way that allows for growth and investment. By the end of this module, entrepreneurs complete their personal budgets, budget calendars, goals for budgeting improvement that are Specific, Measurable, Achievable, Realistic, and Timely (SMART), and implement a plan of their budget and goals.
Debt, Equity, and Grants
Small businesses can get finance from different sources and in different forms. Often, deciding which form of financing and from which source to choose can be a daunting task. This module explores the different forms of financing available for small businesses including their advantages and disadvantages. It focuses on debt financing, the prerequisites for getting a business loan, and how to determine the financing needs of one’s business. Participants get to hear local bankers talk about how a bank determines its business creditworthiness.
Understanding Credit & Creditworthiness
Sixty-five percent of non-employer (no employees on payroll) Black-owned firms cite low credit scores as the reason they are denied loans compared to 44 percent of non-Hispanic, white non-employer entrepreneurs. In partnership with Arizona Federal Credit Union, this module takes a deep dive into the complexities of credit and creditworthiness. By the end of this module, entrepreneurs develop SMART goals for their credit score improvement and implement a plan to become financing-ready by the end of the program. Participants also meet with an AZ Federal Credit Union banker and We Rise staff on a monthly basis to track their progress and devise new strategies to meet their creditworthiness goals. At the end of the program, those that are financing-ready qualify for a business loan from AZ Federal Credit Union.
The ultimate goal of the We Rise Accelerator program is to provide small, Black-owned businesses with the foundational knowledge, skills, habits, and social capital they need to grow. Top of mind is that growth -- whether opening a new location, designing new products or services, or buying equipment -- requires a large upfront investment, which can drain working capital. The business financing modules are designed to incorporate practical knowledge with tangible efforts to address real impediments, especially lack of access to and the high cost of capital.