Thursday, November 19, 2020

New Article -- Financing Minority Entrepreneurship

Carlos Berdej√≥ recently posted a fascinating new article to SSRN, entitled Financing Minority Entrepreneurship.  In it, he examines the reasons why minorities struggle to access capital when starting businesses and takes a close look at how existing programs have not succeeded at increasing access to capital.  He argues that a successful program will increase equity and hybrid investment while also addressing informational asymmetry issues.  

He proposes that a new type of Small Business Investment Company (SBIC) -- a Local Impact Small Investment Company (LISBIC) might offer a way to address many of the barriers faced by minority-owned businesses.  A LISBIC would do much of what a SBIC does, but with a more localized focus.  This local focus would allow the LISBIC to better evaluate soft-information about investment opportunities while its structure and design would generate credibility with investors.

The article also explores many practical and technical challenges to implementing such a program.  It left me with the sense that this sort of program would be achievable and might even pass through a divided Congress.  Hopefully, policymakers and legislators will consider this approach to increase access to capital.

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Thanks for posting. I vicariously explored female access to start-up and working capital when my wife was pursuing her MBA 20+ years ago. Its a conundrum with government involvement because there is no more ineffective, inefficient vehicle for achieving positive results.

Posted by: Tom N. | Nov 20, 2020 7:31:23 PM

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