Too many Americans have been denied the opportunity to turn their ideas into businesses because they lacked the funding required to do so. Between 90% and 95% of entrepreneurs who hire employees require some amount of financing to start their business, making capital a critical requirement for new business creation. However, many government programs meant to provide capital to entrepreneurs are biased in favor of established businesses instead of newer businesses. To address the significant and persistent gaps in access to capital, the Biden administration has prioritized a coordinated initiative across the federal government to close such gaps for entrepreneurs everywhere by 2030. In doing so, the policymakers should:

• Request that Congress make permanent the State Small Business Credit Initiative (SSBCI) and heighten the monitoring of its effectiveness in serving demographically and geographically diverse entrepreneurs. Doing so will expand capital access through patient capital, innovative investment models and technologies, financing guarantees, user-centered service design, community banking, and other means.
• Request that the Federal Deposit Insurance Corporation (FDIC), Federal Reserve Board, and Office of the Comptroller of the Currency modernize the Community Reinvestment Act (CRA) through an equitable lens. Modernization of the CRA should prioritize making sure the signature legislation benefits the underserved communities and entrepreneurs it was intended to support. The CRA’s weighting system must support more small business lending in disinvested communities — revisiting the idea that all Small Business Administration loans should count toward CRA credit — while simultaneously rethinking geographic-based ties in response to the emergence of the financial technology sector and bank consolidation.
• Incentivize financial innovation that addresses gaps in capital access by spurring the creation of a new generation of funding models that serve all types of new businesses, especially those currently underserved by the capital marketplace. Many government funding sources and incentives are limited to small business lending and venture capital funding; other flexible financing mechanisms, such as revenue-based investing and employee ownership models, are worthy of attention.
• Catalyze tech-based financial innovation that can use technology to reduce bias and barriers for Black- and Brown-owned businesses. A recent study showed that fintech lenders were responsible for 53.6% of Paycheck Protection Program (PPP) loans to Black-owned businesses, while only accounting for 17.4% of all PPP loans. In geographic areas where racial discrimination was evaluated as high, fintech provided better loan access than small community banks.