Building a Strong and More Equitable Future

RICK MATTOON: Good afternoon. I'm Rick Mattoon, vice president and regional executive at the Detroit branch of the Federal Reserve Bank of Chicago. I'd like to welcome you to today's Project Hometown panel, supporting Detroit minority businesses, access to capital, and lessons learned. Today's program is another installment in the Chicago Fed's Project Hometown initiative.

Started last year, Project Hometown is dedicated to identifying the strengths and challenges facing the hometowns within our Federal Reserve district. Recovering from the pandemic will require extraordinary effort and the need for identifying strategies for promoting inclusive economic growth. Project Hometown is designed to bring together civic leaders, expert researchers, Chicago Fed staff, and concerned residents. And through these diverse perspectives, we will examine how our hometowns can recover from the pandemic, overcome long standing inequities, grow stronger, and provide for all people the opportunity to thrive.

This afternoon's program will take a particularly critical issue in helping communities to restore economic vitality, and that's access to capital. Small and micro businesses, and particularly businesses owned by people of color, have seen unequal access to finance and capital and are facing higher closure rates. These firms often make up the very fabric of their neighborhoods and support local employment and promote wealth accumulation within their communities.

To investigate the financial and capital issues facing these firms, we've assembled an all-star panel, and we're extremely thankful that they've all agreed to share their expertise and time with us today. So let's jump right into this. I will now turn the program over to our moderator, Joe Anderson. In addition being a civic and business leader, Joe a passionate advocate for minority businesses throughout Detroit. In his professional capacity, Joe is CEO of TAG Holdings. He also serves as chairman of the Detroit branch board of the Federal Reserve Bank of Chicago. Joe, thanks for your work on this important subject, and I'll let you introduce the topic and our panelists.

JOE ANDERSON: Thank you very much, Rick. And good afternoon, everybody. As Rick said, I am chairman and CEO of TAG holdings, a holding company that owns several companies in the metro Detroit area and beyond in the past. It is my pleasure to moderate today's discussion examining conditions and barriers to capital faced by Black-owned small and micro businesses in Detroit.

In other words, let's talk about unequal access to capital. Before we get started today, I wanted to offer a few thoughts. Black-owned small businesses have long faced unequal access. The onset of the COVID pandemic further highlighted this capital funding gap. Historically, these businesses have faced weaker traditional banking relationships. They created significant problems during the early rounds of PPP funding. Given that the channels for distributing PPP was usually defined by providing incentives for banks to fund their existing clients, unbanked or unbankable businesses were largely shut out of the original distributions.

The question is, why didn't these businesses have banking relationships? Are there clear external barriers that prevent these businesses from adding banking relationships? Are there issues of internal business capacity that suggests that these businesses lack the knowledge or skills to qualify for lending? These are all questions and issues that need to be addressed and sorted out?

A second theme I want to highlight is the role that small Black-owned businesses have within their communities. Numerous studies have found that Black households have significantly lower savings and accumulated wealth than white households. Healthy small businesses provide a key mechanism where wealth can be built and retained in Black communities. This is critical to economic development of neighborhood and creating investment opportunities. Supporting the vibrancy of Black-owned businesses by ensuring that they have necessary financing and access to capital to build and sustain their businesses will provide both economic and social benefits.

One last point. As the son of an entrepreneur who I didn't realize was an entrepreneur because he had a day job at the Santa Fe Railroad, but he was also the Black photographer in Topeka, Kansas, and he also sold vegetables, and he did a variety of things, but he always did this himself, and there was no way that he was going to scale these activities.

As I moved into college, graduated, went into the military, went into corporate America at General Motors, and on then to entrepreneurship, I quickly learned that these needs for capital are the key to success. And so let's turn to our panel and discuss some of these topics. And so to start this off, I would like to introduce the first of our panelists, Dr. Ken Harris. Each of these panelists will have five minutes to provide their perspective on this issue, and then we'll open things up for discussion.

Dr. Harris is president and CEO of the National Business League. The league traces its roots all the way back to Booker T Washington and advocates for Black-owned business throughout the United States. Welcome aboard, Ken. As head of the largest Black-owned business organization in the nation, what can you tell us about what are the types of Black businesses in Detroit and the challenges that they face?

LAUREN SHELBY: Ken, can you unmute yourself?

KEN HARRIS: Thank you so much, Joe, for having me on this program today. Technology seems to work well for us, and learning to hit the mute button is important. With that being said, Detroit is unlike anywhere in this country and has a history of extreme racial tension and exclusion and uprising. Detroit, as a super majority Black city with an 80% Black population, boasts more than 49,000 Black businesses out of 62,000 small businesses in Detroit, which means Black businesses represent 80% of all of Detroit-based businesses based on 2017 census track statistics.

Just think if banking and financial institutions were to help 49,000 Black businesses hire one, two, or three more people, the local economy could not only double, but triple. This is simple math, folks. But in the year 2021, this isn't the case. Rather, the super majority Black population continues to be largely excluded from the financial and capital marketplace and traditional banks.

The historical narrative behind it, there is a reason Black businesses don't trust the banking and financial industry as it pertains to traditional capital access. Ever since white people post-slavery ran the first Black bank into the ground, which was called the Bureau of Refugees Freedmen and Abandoned Lands, also known as the Freedmen's Bureau, which was operated by the US federal government between 1865 and 1872 for Black people.

After white executives stole Civil War veterans' pensions, savings accounts, and land acquired through reparations settlement, Black entrepreneurs haven't trusted the banking industry since. Because of Black Codes, Jim Crow segregation, all the way up until the late 1960s after the passage of the Civil Rights Act, Black people couldn't even bank at a traditional lender nor receive capital to start a small business. And if Black folks did use savings kept under the mattress or from the friends and family plan or getting a loan from the numbers guy around the corner, Black businesses still virtually locked out of the game and let alone being harassed or hung or murdered by white supremacist organizations like the KKK.

Lastly, the banking and financial industry was never set up for Black and Indigenous small businesses to gain access to capital in the first place. This is why so many barriers to entry have been put in place. And 50 years later, after the COVID-19 pandemic and the racial unrest and unarmed murders of so many Black and Brown men and women, has put a bright spotlight which has been placed on the continued inequities that have existed in the banking industry.

So it is extremely critical as we deal with the systematic institutional and structural racism and white supremacy and racial caste that still exist in this country, we have to make the financial and banking marketplace open to Black and Indigenous communities while also at the same time holding these institutions accountable. So I will say, as COVID-19 and the Black Lives Matter movement have taken place, it's unfortunate that 50 years later, post the passing of the Civil Rights Act, that Black and Indigenous businesses are still excluded from the banking industry. This tells us a lot, folks.

So I look forward to entertaining this discussion today. We have also found out that during COVID-19, not only did we have a health crisis, we also simultaneously had an economic crisis. When white businesses caught a cold, Black people caught the flu, but Black businesses caught the extreme end of COVID-19, complete economic shutdown.

And as it has already been predicted by CBS News, Wall Street Journal, New York Times and so of a study that was done out of California, more than 40% of Black businesses have been predicted to either shut their doors permanently or are one or two paychecks away from literally going out of business, so cutting nearly 2.6 million Black businesses in half, which is severe to the economy, which prior to the pandemic were growing three times the national rate. So we have work to do. It's time for intentionality. We have to get past press conferences and platitudes, and we need to deal with policy and structural issues that still exist. Thank you so much, Joe, and I look forward to participating in the question and answer session of this particular forum.

JOE ANDERSON: Thank you very much, Ken, and thank you for those specific insights. Now we'd like to turn to Pamela Lewis. She is the executive director of Detroit's New Economy Initiative. Pam, can you tell us how NEI works to support a network of under-served small and micro businesses in Detroit and how the pandemic has revealed the gaps in supporting this community?

PAMELA LEWIS: Thank you Joe for this opportunity, but I want to challenge you, Joe, for putting me behind Dr. Harris. You know, your comments were very compelling, Ken, and the history lesson is something that we all need to remember and recall. And we're talking about three different sectors here, too, philanthropy, the private sector as well as the public sector.

The space and lane that I swim in is the philanthropic sector, and it's been uniquely positioned in Detroit to provide grant capital to organizations that have been providing accessible support to small businesses. Now, it's important to recognize that the work that we've been doing has been focused primarily on what we call the most under-served small business because we're talking about charitable purpose dollars.

And so these are businesses that are typically, like Ken, described micro businesses under 10. These are not large supplier and manufacturers. These are businesses that don't typically have access to professional advisors and commercial bank relationships, but the experiment we've been running for the last seven years or so, if philanthropy is putting grant dollars into micro-finance organizations, community development financial institutions, and practical assistance providers, can we create an on ramp and different points of entry for these types of businesses? Because if someone has the idea and will to start a business, they ought to have the right to do so, you know?

And so this has been the work that the New Economy Initiative has done. And just to put it in perspective, we sit within the Community Foundation for Southeast Michigan, and most cities have community foundations, but we're funded by national and local foundations from KRESGE to Ford to Kellogg and others that have invested in this for a while. And what we've been able to do with this grant-making is also to collect client data from the people we're giving grants, too, to understand the makeup and the profile of the businesses they're helping and the disparities that we're talking about today.

So there's been a lot to learn. There's a lot to discuss. And just as a point of example, even prior to COVID, if you look at the SBA dollars that were lent through the 7(a) program, in 2019, about $20 billion of dollars went into the market. And if you look at the average loan size, the average loan size of that was $350,000. Well, if you think of the average Black business-- if most Black and minority businesses are micro enterprises under 10 and a lot of them in our city don't even aren't even having revenues over $100,000, $250,000, there could be a design problem with some of the government lending programs because they're really focusing on a larger small business.

And in that number, too, 6% went to Latinx businesses. 3% went to Black businesses. And the part that deals with community advantage programming for under-served communities across the country, only 1% of those dollars went there, and that was either whether the business was Black, Latinx, Middle Eastern, or in a rural part of America. So you're right. There is a discussion to be had about what can be done, but yeah, but I do think philanthropy has played a unique role here, but we're smart enough to realize that our role is only laying some bricks but not laying any more to really hold something that's sustainable.

The network of support that we've invested in, we touch 25 to 3,000 businesses a year. But as Ken described, there 60,000 businesses in the city of Detroit. You know, 14,000 of those are employer-based businesses, and so there's work to do. I'll stop there.

JOE ANDERSON: Thank you very much, Pam. Now I'd like to turn the process over to Sandy Pierce who's the senior executive vice president of Huntingdon Bank. Sandy, can you tell us what Huntington has done to try and understand the needs of small minority businesses and what barriers they face in accessing capital?

SANDY PIERCE: Thank you, Joe. And I want to start by just saying that Dr. Harris gave some statistics about Black and Brown owned businesses in Detroit and what the status is. I think about 2020, and I think about the global pandemic, and the social unrest, and the political divisiveness, and the economic fallout, and the thousands of individuals and businesses that were negatively impacted. I would say, and I agree, that we all have to do more. It is time to recognize that we have to do more.

So here's what Huntington Bank has done. You know, we put out a community plan that encompassed small business access to capital, affordable housing and home ownership, community investment, $20 billion plan. And as we went through 2020, we decided that it was time to actually go and listen to all of our markets. So we did in the last four weeks 15 listening sessions across our footprint, 350 organizations, nonprofit organizations who, for their living, they support affordable housing, and they support small businesses.

And for me, we found out things that I simply didn't know how deep some of these issues were, especially for the Black and Indigenous people, especially. So what did we hear? Because I was like, why are we not getting at the most vulnerable? Why are we-- we're putting out these really specific programs and plans and products. Why are we not getting at those that are under-resourced and most vulnerable?

And here's what we heard. Number one-- and Ken, you mention this-- the trust gap. For all the reasons that Dr. Harris went through in history, banks are not trusted. And so we have to really think about how can we partner with intermediaries that they trust so that we can give them access to what we have to offer, and I'm going to give you a couple of examples of what we have to offer, but their mistreatment and how they've been victimized in the past gives them reason for not trusting us.

Number two, communication. This information gap, there are so many out there, businesses and individuals, that self-select out of our programs. And I don't just mean Huntington's. I mean in the financial services industry. Often when they qualify for the products, but they don't even know it. So how do we communicate that?

And then the resource gap. It's not just the awareness of their products and services, but it is this wrap around ecosystem beyond charitable giving, beyond a loan so that they can be educated and have a business that's sustainable beyond the charitable grant and beyond the loan. It's more than that. It's an entire ecosystem, and it requires-- it really does require a village.

It's more than a bank. It's more than one of the nonprofits. It's more than a foundation. It's all of us together. There is a resource gap, and it takes all of us to fill that gap. And what we've learned is that we have to do more. We have to do better. Yes, the regulatory agencies can help us. Yes, the community groups can help us, but the financial institutions, including Huntington, we want to do more, and we need to do more.

And how do we do it? We've got to listen. I just told you we talked to 350 organizations in the last four weeks. And then we have to act, and then we have to measure and be transparent with the results. [INAUDIBLE] --a lot more to do, and I'm happy to have a lot more conversation about this as we go on.

JOE ANDERSON: Thank you so much, Sandy. And finally, I'd like to turn to Michelle Sourie Robinson who is president and CEO of the Michigan Minority Supplier Development Council. Michelle, can you tell us what the role of capital is in supporting sustainable growth, and what have you seen in terms of unequal access to capital for minority firms? How does this impact the supply chain firms you work with?

MICHELLE SOURIE ROBINSON: First, thank you for having me, Joe. And I have to say, going behind Dr. Harris and then Pamela and then Sandy, I don't want to be redundant, but I think they've all touched on this. And when we look at the issue, Dr. Harris is right. It's steeped in centuries of mistrust. I think what's most astonishing to me, the businesses that we represent at the council range anywhere from those in the startup phase to those that are multibillion dollar enterprises.

Yet when you look at that, 60% of our businesses are over $10 million in annual revenue, and about 25% are over $20 million, and then we have several multibillion dollar firms that we support. Yet we also still hear from these firms about the cost of capital. In fact, when you look at studies by McKinsey, they'll show you that MBEs, minority business enterprises, are two times more likely than their white counterparts to report that the cost of capital is prohibitive to the growth of their businesses.

They are also typically going to share many stories of literally looking at credit worthiness and knowing that the judgment for them, they're going to face higher interest rates, lower loan amounts. We saw this play out in PPP. At the end of the day, though, our organization just with 1,200 businesses that we serve as certified businesses doing business with major corporations and government agencies, we're driving about $36 billion in economic impact.

We are creating and sustaining each year 205,000 jobs. Our economy loses-- if you simply look at the Black-white wealth gap, our economy loses it's estimated between a trillion and $1.5 trillion every year. So we continue to have conversations about this subject, but Sandy said it best. We must act. The reality is the policies the processes, even the systems put in place were designed to stifle the growth of non-white businesses. We must simply face that fact, and we would do our future generations a disservice by continuing to follow that path and hoping that it might achieve something differently.

Last year when we looked at the many amazing statements from corporations really talking about the impact of seeing up close and personal social injustice, for many people it was the first time they had seen it. Those statements were moving. The marketing campaigns were impactful. But in order to drive sustainable growth, we need more than checks being written, and we need to do more than talk. It is time to act.

When I look at the reasons supplier diversity was created, it was to build wealth, to allow minority communities to thrive in a manner that helped all communities thrive because we believe that a rising tide lifts all boats. Yet when Dr. King was assassinated in 1968, President Nixon created the very agency-- the Minority Business Development Agency as we now know it today through the Department of Commerce. Yet more than 50 years later, when you look at the amount of growth that's taken place, we have certainly grown the number of minority businesses more than 1,000% in more than 50 years.

Sadly, we've barely grown 1%, however, in the actual growth in the size of those firms. Less than 2% of the minority businesses in this nation gross more than $1 million in annual revenue. So I would present to you that in order to solve this capital access issue, we must all take a different approach and really understand that the systems as they are today will continue to stifle the growth.

Our organization has taken on some new research of late because we wanted to say, how long would it really take for us to achieve economic parity? I was sharing with my fellow panelists before this presentation today that I received the preliminary numbers just this morning, and the estimate right now is 333 years. So we are literally leaving a problem that Dr. Harris stated so eloquently at the beginning, we're leaving it for future generations. And I would simply ask that all of us on this call really take a step back and say now is the time to act. No more talking. Let's act. Thank you.

JOE ANDERSON: Thank you, Michelle. And you ended with the word act, and that's what we're about. And as Rick Mattoon and I have worked to get this panel together and then talk about where we go from here, it's about not gathering information, not gathering data, but gathering the information and data that frames what we need to do, how we need to act, and Sandy and all of us have referenced that subject.

So let's open it up for some further discussion. And so one of my concerns is that the capital needs of businesses differ widely based on the size and type of business. I've been an automotive supplier, and I've been in the business with 50's and $100 million businesses around me, but there are so many smaller and micro businesses. And quite frankly, Ken Harris has helped me to understand that other world.

So, Dr. Harris, please talk a little bit about the differences in the sizes of businesses and what they're in so that my barber-- no jokes, please-- my barber Willy, who doesn't need deep banking relationships, but also may have needs along with the major supplier friends that I know. Ken Harris, take it away, please.

KEN HARRIS: Well. Joe, to be entirely intentional about that comment, this is not a statistical secret, right? We know that 70% of the American economy is small business owners between 1 and 10 employees. The President of the United States, Joe Biden, just came out and acknowledged that, that we need to pay more attention not only to small businesses in America, but to the Black and the indigenous and minority business communities that exist.

And so, you know, again, I think COVID-19 and the pandemic has put a huge glowing and glaring spotlight on the inequities that exist. But as we have witnessed almost a complete failure of government and traditional banks to support financially the most impacted, the most vulnerable, the under-capitalised, marginalized, and neglected, which are Black and Indigenous businesses.

We saw that out of the CARES Act, the stimulus one went to the wealthy and well-connected, trillions of dollars. And that fund was expended in just two weeks. We also saw in stimulus two, which earmarked $60 billion in funding for minorities through minority depository institutions, CDFIs, community banks, et cetera, never spent all of that money after many, many months leading up to this point.

And a think about it again. Even if Black and Indigenous businesses got to the table, they had no connection to traditional banks. They weren't prepared for the barrier stricken paperwork that exists, and the fears of government and traditional banks have increased tremendously. So again, 95% of Black businesses are sole proprietors, micro businesses, home-based businesses, or what I would like to say on the side side hustles, looking to really leave their on the clock job one day and really dive into this entrepreneurial thing.

And so most banks and financial programs that exist today ignore the under 3 to 10 small business economy, which again, is 70% of the American economy. So go figure. And I would make in the last comment, now more than ever, Black business organizations which are ignored in large part by the traditional community, philanthropic community, is still trying to figure it out how to connect CDFIs even though is dependent upon by traditional lenders aren't really meeting the measure of connecting the dots.

And more importantly, in terms of traditional banking industry, giving direct technical assistance and a pipeline to Black businesses find themselves working with those who want to do business with the Black business community. And so it is important, as a result, examples that we have done. We partnered with American Express last year to provide over $10 million in grants to Black businesses.

We partnered with Comerica Bank who committed for the next four years over $1 million annually to bring technical assistance to Black businesses. We partnered with several other traditional lenders to cut out the middle person, to get past the fluff, and to get past these empty press conferences and platitudes and be really intentional about racial equity and change.

And then we also partnered with the federal government. We received-- was a recipient of the $10 million grant of the US Department of Commerce Minority Business Development Agency to help Black businesses recover dawn COVID-19. And the NBL also announced a multi-million dollar portal to process PPP loans for Black and Indigenous businesses in partnership with the Minority CBW Bank, which is a fintech company, and this is just one organization.

So what I say to your statement is, Joe, absolutely. We have to focus on what is the majority economy which is small businesses in America. We cannot have a benign neglect approach to Black and Indigenous businesses. And matter of fact, if I see a program that does not explicitly highlight Black and Indigenous businesses, I know that it's status quo. And so we must get real about our situation, and we have a huge opportunity in front of us, and I'm thankful that we have Pamela at the table where she is in the philanthropic community. We have Michelle in terms of the minority community, and Sandy's comments is the type of leadership, especially from white leadership, that we need to push the envelope.

So I look forward to hearing your other comments on the panel.

JOE ANDERSON: Thanks again. Michelle, would you talk further about trying to work with larger businesses, finding capital, scaling those businesses, and working with their customers as you do so effectively with Michigan Minority Supplier Development Council.

MICHELLE SOURIE ROBINSON: Absolutely. You know, Ken's last comment I want to touch on because most of the time people are afraid to say Black and white, and that's one of the things we have to get beyond immediately. There are some realities as to who we are. And at the end of the day, Sandy's ability to speak in a room will often garner more action, , support, and activity that leads to results than Ken, Pamela, Joe, or any of us could ever muster. So thank you, Sandy, for your comments and the passion with which you spoke to them.

I want to, in answering Joe's question, simply say this. When I moved to Michigan, I moved here because I saw that what we knew then as supplier diversity was literally dying on the vine and not achieving what was necessary. Michigan was very attractive to me because it's one of the few places in the country, and I would argue the only single state, where you have corporations where you literally have C-suite leaders 25 years ago that took the steps that literally created the Joe Andersons, that literally created the Dr. Bill Pickards, and gave room for growth to those types of businesses.

How did that happen? It wasn't that they created a VC and came up with some particularly nuanced way of looking at capital. They got really scrappy. And when I researched this-- because if you look literally at what we call our largest minority business owners, those over 50 million, about 10% of our population over $50 million in annual revenue. And as I said earlier, many of them now multibillion dollar firms.

You can almost to a T, those that are 25 years or older in age, you can tie them back to one of those 10 or 12 C-suite leaders from 25 years ago. I shared that to simply say this is not rocket science. They were simply deliberate and intentional about the growth of Black businesses. So they themselves got behind it with not only passionate words, but they then put into practice policies and practices, sometimes even within their corporations identifying ways to guarantee loans to those that did not have the capital or the capacity at the time for the business that was being entrusted to them.

We have been very creative as a state, and that is how we've reaped the benefit of the job creators that we have today. What it will take for our large supply chain oriented businesses in the future is for corporations to make those same decisions. Sadly, what I find is that, in many corporations, what has happened is we now relegate that duty to a manager, perhaps maybe a director-level employee within a major multibillion dollar company, and it is simply not going to be fruitful, shall we say.

The chief procurement officers, the CEOs, COOs in these corporations can work alongside with our financial services industry to really shift this tide. Minority businesses, Indigenous businesses, Black-owned businesses have never asked for a handout. They're simply asking for the opportunity to compete. When I even look at governmental contracts, however, they're not able to compete because they don't have the access to the capital that is necessary for them to grow their businesses. I believe, by being deliberate and intentional, we can certainly bridge that divide.

JOE ANDERSON: Thanks, Michelle. I'd like to reinforce the point you're making. When I bought my first company in 1994, the head of purchasing for General Motors came to my office, and he said, Joe, this is not about. It's about the community. And so we're going to give you this opportunity, but we expect you to hire Black people, and we expect you to make a difference in your community, and I've carried that all the way, and that's why I'm involved in this panel today.

Let's turn back to the issue of trust that Sandy spoke of so eloquently. Pam, you're involved in NEI, and there's a number of initiatives that go on there. Can you tell us a little bit about how you and the community help work on the issue of trust and financing for Black businesses?

PAMELA LEWIS: Sure. Yeah. The point that you made earlier, too, I want to circle back to. First of all, the lumping of Black businesses into one group, I think, is a big problem. And so the more we can segment them out and separate the needs of the micro business from that B2B from that supplier would be very important. One of the things that we've been doing-- because philanthropy and economic development is strange anyway, right?

And so the grants that we're moving are to nonprofits, but they're not always to traditional nonprofits that are in an entrepreneurial ecosystem. Community development organizations have been a very critical player in our work when you're talking about making sure that a business in Osborn neighborhood, understands the resources that are available to her or to him, working with Paul Garrison in Osborn Neighborhood Alliance makes the world of difference, right?

And if he understands that they can go to Detroit Development Fund and get a microloan, or go to Michigan Women Forward and get the capital that they need, that makes a world of difference. So having these what I like to call trusted connectors in the community that aren't necessarily the obvious players, but community development organizations play a very trusted role in most neighborhoods for most neighborhood businesses, but that requires capacity building within those organizations. You just can't ask them to do that for free. And so there needs to be capacity built and resources built for them to do that work.

The other thing I want to push on is we did a survey recently of about 600 Wayne County micro businesses, and it was fascinating to hear, across the board, access to capital was the very top need. I think that was obvious, but what linked to that was also the ability to pivot. When COVID hit, a neighborhood store front main street business-- I think it was 'Fame' Brown who runs Three Thirteen in Livernois Six area said, if you're asking me to pivot, everybody says just pivot.

You know, go online. If you ask Alice Brazelton of Brazelton Florist on the boulevard to pivot, you're asking her to start a whole new business. And if there aren't expert advisors, not necessarily webinars and classes, but expert advisors to help her transition that as well as the dollars to help her understand what equipment she needs to do in order to make that transition, dollars to subsidize that cost, those things make the difference.

At the end of the day, we got to look at the uncommon players like the CDOs. We got to look at how we can derisk dollars that are in the CDFIs and the micro-finance organizations because they're lending to these vulnerable populations, but they're lending to them at very high interest rates because they have to have grant dollars to derisk that lending, to guarantee that lending.

And so, I don't know, I think I'm talking a little bit in circles here. But you know, the whole notion of trust is critical, but segmenting these businesses out to make sure that we're not lumping all Black businesses in one group because the needs are different, looking at these uncommon players that already have trust, the role of churches, the role of community development organizations, the role that they play, how can we add capacity to them to be a concierge of sort to help businesses find the resources they need to partner with the Sandy Pierces, to partner with these other resources.

And the last thing I'll say, I think there is a-- when Ken talked-- if you understand that the majority of businesses in this country are micro enterprises, and that's also where most of the minority based businesses live, there's something wrong with the science of economic development, in my opinion, because they seem to get completely left out of the equation of what makes an economy strong. You know, business attraction, venture and tech development, but no one really-- you can't find enough support from government or a segmentation of data to understand the value of that micro business. And I think with the pandemic has showed us, unfortunately, is that value, but in a catastrophic way.

JOE ANDERSON: Thanks, Pam. Sandy, I'd like to come back to you and raise the issue of trust from your perspective. We, people who have gone in for loans, dread the underwriters. The loan officer will always be nice and supportive and so forth, and then it goes somewhere and nothing happens. And so we've had the experience of redlining. We've had the experience of predatory lending. You've been on this listening tour. Tell us what are the things that might need to be done differently. And oh, by the way, we have the Federal Reserve supporting this effort. What does the Federal Reserve need to do different to support you to support minority businesses? If you will, Sandy.

SANDY PIERCE: That's a lot to unpack, Joe, but let me start with telling everyone that Sandy Pierce grew up in the city of Detroit on Chene Street, the youngest of 10 children on top of her parents bar. 67 riots happened right outside my front door. I lived in a very diverse neighborhood, and the reason I tell that story is I feel fortunate to be with a bank that cares about the communities we're fortunate enough to serve.

And so I'm going to get to trust by explaining a few of our products that we don't know how to actually reach the most under-resourced and most deserving of the small businesses in Detroit. So we have something called 24 hour grace for businesses. If you overdraw your account-- and haven't we all-- you have 24 hours until midnight the next day to fix it without a fee. 24 hours to fix it with no fee.

We have a $50 safety zone. If you overdraw your business account for less than $50, there's no fee ever. We have something called Lift Local Business. Lift Local Business is a $25 million pilot for small businesses, absolutely low cost, patient access to capital, free checking, free treasury management services, no fees. We pay the SBA fees. We don't charge any fees.

We wrap it with financial education and a small business coach. We work with Operation Hope there. We are focused on Black-owned businesses. We are focused on women-owned businesses, and we're focused on veteran-owned businesses and restored citizens on violent felons as low as $1,000 to as high as $150,000. All of you gave statistics.

60%-- this is what I've read-- 60% of the businesses that closed because of COVID will never reopen. 60% will never reopen. Of those 49,000 businesses in Detroit that are Black-owned, most of them are less than 250,000 in revenue. Most of them are less than 100,000 in revenue, have a few employees, and they need-- they don't want-- here's what we heard. They don't want a handout. They want to lift up.

And so trust, to me, is that there are policies that have to be changed, and you mentioned some things that some of the financial institutions-- there are processes that we have to change. I agree with you. There are regulatory policies that have to be changed, but what we have to get through-- and we have to partner. The only way I'm going to be able to do this as a leader at Huntington and that we as an organization are going to be able to do this is we have to work with the CDOs, we have to work with the CDFIs, we have to work with the minority depository institutions, and the faith-based organizations so that those that are under-resourced trust to come in and take advantage of the products and programs that we're putting in place. I think partnerships are really important, Joe. Doing things different as you just mentioned are really different, and then we are committed to working on policy changes in DC at the state and at the federal level to get rid of some of the impediments that exist for those that are most deserving.

JOE ANDERSON: Great, Sandy. That's what I was anxious to hear. Ken, of course, you are so focused on this issue. In terms of the members of your organization, what do they tell you are the systems, the institutional and structural issues that limit their access to capital? And more importantly, how can we help them address those issues with the sources of capital? What are your thoughts?

KEN HARRIS: I mean, we have to be honest, right? The average Black business owner, not just in the city of Detroit, throughout the state of Michigan, has no relationship with the capital and financial market place. Period. All right? They put their money under the mattress. They save as much as they can. When it's time for them to either have some startup capital, they go through the friends and family model.

Their source of capital-- understanding how capital works in this country is very minor and minuscule in terms of where we are. So we have to start from the basic concepts of education, of trust, of learning what it is to be bankable, to be investable in this marketplace, how to connect with economic ecosystems. You know, sometimes when I have folks go to our resource pool or use our technology, they'll be like, oh my goodness. I never knew all of these resources were available.

Well, guess what? When a white business comes into the marketplace, and although they're a small minority in Detroit, the majority of the lending, the majority of the resources are going to the white business owner. They have no problems getting their business off the ground and well capitalized and funded because they know how to participate in a system that was made for them to benefit.

So if there's an extreme disconnect between, like I said-- I think, Pamela, you hit it on the head. There's complete institutional, structural, and systematic changes that need to occur. Sandy, you hit it as well. We're going to have to focus on policy that addresses certain things, but we are going to have to be intentional with partnering with people. When I hear conversations about CDFIs, CDFIs are missing the boat. They're not getting capital to the community either, right?

MDIs are missing the boat. Black banks are literally ignored. We have one Black bank in the city of Detroit, and that's First and Independence Bank, the only Black bank in the country, the one of 16 across the country, which at one point was 162. Our trusted institutions are even relatively going out of business, right? So we need to have a real international conversation. I would say it's time for the banking and financial industry to wake up to modern times.

I will say this as well. By the year 2043 or in the next 10 to 20 years, the majority of this country will be Black and Brown. The future depositor, the future small business and home owner in America will be Black and Brown. Not only is this a relative fact, the fastest growing segment of entrepreneurs in the country come from Black and Indigenous communities.

While black women are the fastest growing segment of entrepreneurs in the entire country regardless of race, creed, color, sexual orientation, and gender, they are being largely ignored by the banking and financial industry. Great to have a Black woman on a panel. But in terms of getting contracts and in terms of getting that Black woman capital that she needs for her business is very minuscule in my view. So again, benign neglect financial policies that have benefited the white population and the status quo also hurts America.

And if we are truly going to be the country that leads the world, we are going to have to adapt our future geographic and demographic population. And so it's time for real leadership, real commitments that are going to take place. We got to get outside of press conferences and platitudes. If I do not hear Michelle Sourie Robinson's organization, the Michigan Minority Supplier Development Council, mentioned as a potential technical assistance or capital funding organization linked directly to the philanthropic community or to the banking institutions or a national business league or Detroit Black Chamber of commerce or Booker T Washington business Association, these business organizations are completely ignored.

So because this country was founded on the tenets of white supremacy, racism, systematic and institutional caste system that still exists, the only way to address these problems is through a race-based capital-oriented process and programs. If it doesn't have Black on it, then it's probably fluff. It's misguided. And thanks to the US Census, we know which is race-based as well. We can measure and potentially hold it accountable.

So the next generation of depositors, small business owners, and homeowners will bank where they are appreciated. And those that don't appreciate, will depreciate. D-E-P-R-E-C-I-A-T-E. Thank you.

JOE ANDERSON: Thank you, Reverend Harris. I'd like to follow up on the point about the capacity and capability of minority businesses. And Pam, I'm going to come to you with this question. But as an example, the kinds of businesses that Michelle supports that are major suppliers, you know, and she has four categories with the highest category being above 50 million, if you talk about the Black enterprise list of the largest Black-owned businesses in America, it goes from 9 billion in revenue. But by the time you get to 99 and 100, It's 5 million in revenue. How can that be?

And part of the issue and challenge is developing the capability and capacity of those businesses to be bankable. One of the things that I interact and find often is when I talked about access to capital, many of the companies that come to me for mentoring I've never heard the term mezzanine financing, and that's just fundamental, but we still have a lot of education and development to go. So, Pam, talk a little bit about the smaller businesses and their challenges and being qualified and into this latest technical term, bankable, please.

PAMELA LEWIS: Yeah. The educational component is huge. And just to even circle back to what Ken just said, what's fascinating even about the CDFIs and the micro-finance organizations, we looked at what's the percentage of people of color that they're actually lending to. Surprisingly, it was over 60% to 70% to 80% of color, but the scale of it doesn't-- the scale of it is too small.

You're talking about hundreds of businesses getting access to that. And so how do you scale that? Yeah. I forgot your question, Joe. I'm sorry. I'm distracted. I'm still thinking about Ken just said.

JOE ANDERSON: Developing the capability and capacity of our smaller businesses [INAUDIBLE] loan. How do they have the where with all 3 year business plan together and present that and a forecast and those kind of things.

PAMELA LEWIS: Here's a part of the problem with that, too, because we've supported a lot of organizations. It's been a lot of time helping businesses build business plans, but what we've learned is that that type of support is good, but it's not great. And when you start to talk to business owners, they trust business more than they trust a bureaucrat like me to sit down with them and help them show how to put together a business plan, and I think there's an opportunity to do more one on one expert advising.

How can some of our nonprofits be coordinating the accountants, the expert advisors, the other successful business owners to provide that education? I think we're in a unique position in this city because of the asset of so many very highly successful Black and Brown CEOs and business owners like you, Joe, and others. And I think there's also a bridge to be built of how can you do more mentoring between those that understand what mezzanine capital means to those that are still trying to balance their checkbook and sell their goods every day feed their families.

And so I just feel like the education part is important, but we have to make sure we're identifying the right people to provide that education, and to use the organizations in the appropriate way to be that trusted doer and connector to the expert advisors that actually hold the information not just to help these businesses start but actually help them grow. Like Ken mentioned before, I think that JPMorgan Chase a couple of years ago said if every existing business has three employees, you could totally change unemployment in Detroit.

We got to get those sole proprietors to three. We got to get those that are three to six, and the people that are going to help them the most are people like you, Joe. You know, people that are running businesses, people that understand what it means to provide that education. So I think we have a unique opportunity to bridge that because we have so many successful Black and Latinx business owners here that could provide that level of insight to those that may not be as sophisticated.

JOE ANDERSON: Well, unfortunately, I think we've come to the end of our appointed time as we were just getting warmed up, but I really appreciate this absolutely wonderful panel for participating and contributing their insights. Do know that the Federal Reserve Bank of Chicago Detroit Branch led by Rick Mattoon, and I'm chairman of the board of the branch here, we're going to take this process and this issue to the next level.

As I've said to Rick over and over, we're not about finding out what the issues are. We're about putting plans and solutions in place, and this discussion is wonderful. We're going to put a survey together to gather the insight further and then talk about what we need to do to make a difference. So with that, look [INAUDIBLE] go from there.

SANDY PIERCE: Joe, if I could just interrupt and say that I think we need to have a further conversation about how we can work together to influence policy changes that are inhibiting access. There's plenty that we can do there if we go together. We could be a very powerful around change. We need to do this.

JOE ANDERSON: I absolutely agree, and I'm getting a thumbs up from Ken, and I think we've got the ball rolling here. So now let's all get behind it. And having been around Michelle Sourie Robinson, I know she's going to be there. So thank you all for participating together, and we look forward to coming back to the participants and listeners of this event and talk about the things we have accomplished, things we have changed, things we have done. Back to your words Sandy, what action have we have taken. We've got to act. Thank you all, and have a great rest of the day.

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Supporting Detroit Minority Businesses: Access to Capital and Lessons Learned

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