Hello Alice Defends Grants For Black Entrepreneurs

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Black/African woman-owned business

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Hello Alice helps small businesses succeed, especially those facing systemic barriers to financing their businesses. It and Progressive Insurance are being sued by America First Legal (AFL)—an activist group that opposes closing economic gaps—for offering 10 $25,000 grants to Black-owned small businesses. They allege racial discrimination.

The legal battle is part of a larger disturbing trend of activist groups trying to dismantle initiatives to level the playing field for underrepresented entrepreneurs, including:

  • A federal judge striking down a provision that equated race with social disadvantage in the Small Business Administration’s 8(a) Business Development program. The program is meant to open a pipeline to billions in government contracting dollars for historically disadvantaged groups.
  • An appeals court pausing Fearless Funds grants for Black women entrepreneurs.

Hello Alice has distributed over $38 million in grants, provided connections for millions of dollars in credit and loans, and mentored 1.3 million small businesses.

The Power Of Grants And Supplier Diversity Programs For Black Women Entrepreneurs

Accessing capital is an ongoing challenge for small business owners. Unfortunately, there are significant disparities in credit accessibility based on factors such as business age, loan size, and location. “Black/African American business owners have historically lacked access to capital and rely more heavily on their savings or credit cards than their white counterparts,” said Angela Dingle, acting president and CEO at Women Impacting Public Policy, a nonpartisan advocacy group. “Access to capital is one of the main determinants of business success, making supplier diversity and scaling programs for Black businesses critical to fostering growth.”

Despite being an avenue to wealth creation, entrepreneurship is not equally accessible to all in the United States. Black/African American women face significant challenges due to lower earnings and wealth. Even when deemed a low credit risk, Black-owned businesses are less likely to be fully funded. Moreover, they have smaller networks that can point them to resources. These are just a few of the reasons they struggle to get funding.

The result is that Black/African American women-owned businesses’ average revenues are dramatically smaller than—$47,300—compared to all women-owned businesses ($192,700), according to the 2023 Wells Fargo Impact of Women-Owned Businesses (IWOB): A focus on Black/African American women.* Closing the gap in average revenues with white women-owned businesses would generate $361.2 billion in revenue to the U.S. economy and $1.5 trillion if Black/African American women-owned businesses achieved the average revenue of men.

Best practices for women entrepreneurs in closing entrepreneurship gaps include providing grants and access to capital coupled with training, which provides the know-how. Hello Alice programs do both. So, too, are government and corporate supplier-diversity programs. “Supplier-diversity programs and programs geared towards scaling Black/African American-owned businesses serve as crucial stepping stones for those business owners as many lack access to capital and the professional networks needed to expand their businesses,” said Dingle.

IWOB found that Black/African American women-owned businesses emerged stronger from the Covid-19 pandemic (average revenues increased 32.7% between 2019 and 2023) than the 2008 financial crisis (average revenues dropped 31.3% between 2007 and 2012).

During the pandemic, Black/African American women-owned businesses benefited from the breadth and depth of support unavailable during the recovery from the 2008 financial crisis. They adapted their businesses in the face of adversity by:

  • Adding new services such as virtual consultations, classes, and events.
  • Shifting to online sales by adding e-commerce, social media, and live streaming.
  • Partnering with other businesses.
  • Taking advantage of supplier-diversity programs.

Lawsuits Threaten Programs That Level The Playing Field For Underrepresented Entrepreneurs

The lawsuit is being undertaken by a trucking company owned by a white man―Freedom Truck Dispatch. AFL, led by Stephen Miller (who served as a senior advisor during Trump’s presidency) and Jonathan F. Mitchell (creator of the near-total ban on abortion in Texas and the legal strategist behind similar efforts in other states), represent the company.

“He did not apply for the grant,” said Elizabeth Gore, president and cofounder of Hello Alice. “He applied for the Small Business Growth Fund [grant].” This grant program is offered in partnership with the Global Entrepreneurship Network (GEN) and with funding from Etsy and Progressive. It provides any small business owner with capital. The trucking company was not one of the companies that won a grant from that program.

The lawsuit is based on the Civil Rights Act of 1866, known as Section 1981. The statute prohibits discrimination based on race, color, and ethnicity when making and enforcing contracts. The lawsuit asserts that small business founders who accept funds from the program enter into a contract with the provider, thereby violating this prohibition. “These are grants; they are not contracts,” said Gore. “The 1981 law clearly states that it is about contracting with a quid pro quo or a delivery of service attached. These are straight-up awards.”

Neal Katyal—former principal deputy solicitor general of the U.S., a partner at Hogan Lovells, and professor of law at Georgetown University—is representing Hello Alice. He calls the lawsuit meritless. Section 1981 is a narrow statute about contracts that doesn’t apply to what Hello Alice and Progressive are doing, he said in The Wall Street Journal.

While not all these lawsuits are being won, they are taking their toll. In 2021, a federal judge declared the Small Business Administration’s distributing Restaurant Relief Fund grants unconstitutional, leaving nearly 3,000 entrepreneurs without much-needed funding. Despite Congress’ direction to prioritize minority, women, and disadvantaged-owned businesses, the judge ruled that grants must be given on a first-come, first-served basis. They are also dampening interest in sponsoring Hello Alice programs.

With high loan interest rates and lower approval rates than before the pandemic, every source of capital is critical for Black entrepreneurs!

“The activists at AFL are using their lawsuit to support their efforts to fundraise,” a recently released statement by Hello Alice said. Instead, as one of the largest and most diverse groups of small business owners, it is galvanizing small businesses and highlighting their contributions to society. Its goal is to demonstrate how the American Dream can flourish for all.

How are you supporting underrepresented entrepreneurs?

*The author of this article is the president of one of the companies that produced The 2023 Impact of Women-Owned Businesses.

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