Owning a business offers individuals an opportunity to increase upward economic mobility for themselves and their families. Small business owners are members of the community – residents who support their families and their children through their business profits. The COVID-19 pandemic’s economic consequences have pushed many municipalities to rethink the business sectors operating within their jurisdictions, including what supports small businesses need to stay open, which businesses are or are not accessing city services and supports and what should be done to connect with more small businesses operating within communities.

Cities that are interested in supporting small Black, Indigenous and people of color (BIPOC) businesses operating within their community should first confirm who these owners are, how many small businesses are operating within their jurisdiction and what their needs may be depending on the business owners’ cultural preferences and business industry type. Municipalities also have an opportunity to celebrate owners who are supporting their employees through livable wages and advance supplier diversity by changing their procurement practices. Additionally, they have an opportunity to keep businesses in operation by assisting owners who are considering retiring, transitioning business ownership to a family member or selling it to their employees through an employee cooperative model.

Unique city roles and levers to boost small businesses:

  • Listener – Engage and convene business owners, financial institutions and business support organizations (BSOs) to better understand the unique needs of the small business ecosystem.
  • Implementer – Fund programs that provide supports and services that allow small business owners to thrive.
  • Community Partner – Call upon community-based organizations to share information about city-funded programs for small businesses.
  • Funder – Create a revolving loan fund for microbusinesses independently or by partnering with a local Community Development Financial Institution (CDFI).

Considerations for Local Leaders

Municipal procurement limitations

Historical discrimination in municipal contracting and hiring has excluded many BIPOC communities from wealth-building opportunities that are critical to supporting the economic mobility of generations. The Supreme Court case Richmond v. Croson ruled that giving procurement preferences to minority-owned companies violated the constitution. However, municipalities seeking equitable approaches to procurement can create pathways that ensure more BIPOC businesses have opportunities to secure government contracts. The pathway approach includes breaking up large contracts into smaller ones that are more manageable for small or new businesses, directing outreach and engaging with BIPOC small business owners to make sure they are aware of the contracts, educating small business owners on how to apply for a city contract and connecting them with resource providers in advance of a contract opening to ensure that they can apply. Additionally, municipalities should review the level of bonding required for contracts that are targeted to small business to make sure that they are right-sized for a contract.

Operations and administrative support

Microbusiness and small business owners often start their businesses because of a passion for their product, but they can lack the skills necessary to reach new customers or access capital. Administrative or operational support can include accounting, human resources, payroll, taxes and website management. These functions are necessary for the growth and strength of businesses. Failing to develop these services or connecting with support organizations that provide them can hinder the wealth that can be created through their business. Municipalities can work with nonprofit, foundation and community college partners to help create back-end support programming to fit the unique needs of small business owners. For example, cities can facilitate support from community college accounting students to provide services to those required to file Schedule C tax forms or support business incubators that can leverage co-located small businesses to offer these administrative functions at a low cost.

Access to capital for women and BIPOC entrepreneurs

Capital is the lifeblood of any small business. Without adequate financing, most entrepreneurs cannot start or grow a business. Access to capital and capacity to navigate complex financial systems is a more significant barrier for BIPOC and women business owners, who historically have been disproportionately impacted by discriminatory financial institution practices and lack generational wealth and social capital. Navigating financial institutions and moving small business owners to business credit often requires assistance and mentorship. Municipalities can work with local financial institutions CDFIs and BSOs to raise their visibility within underserved communities so employers know where to go to help them access safe and affordable capital and services. This can be done through community events, business engagement outreach and the creation of a web-based business support resource hub. Additionally, cities can consider operating their own revolving loan fund that could offer microloans to small businesses that are working to establish their business credit or providing essential services for the community (i.e., child care). Cities can target these loan funds to specific underserved populations, such as BIPOC communities, immigrant populations, returning citizens or single parents.

Small business ownership transition

Like most workers, small business owners also hope to retire someday. However, when business owners retire, a community can lose jobs and wealth. Engagement with small business owners before they move on to retirement is key to helping them understand options to keep the business operating. These efforts often require access to legal and financial services and time to create a plan that will allow the business to continue under new leadership. Municipalities may not know when a small business owner is thinking about retirement and therefore may not be able to connect with them or provide assistance that would preserve the business, employee jobs and wealth generated by the business. Ongoing engagement with business owners and surveys to better understand retirement plans can help cities better understand and reach these businesses with succession planning support.

Growth of local small businesses

Municipalities across the country often have departments that are devoted to enticing new industry to move into their cities in order to bring jobs to their communities with incentive packages that support the development of land or training of needed labor. To strengthen the economic mobility of residents, cities can instead focus their resources on cultivating the small businesses that operate within their jurisdiction in efforts to help them grow revenue and staff that would keep wealth within communities. This type of thinking could require reevaluating municipal departments and require additional assistance to ensure that regional education efforts support entrepreneurship and that business sectors are supported to increase impact.

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Cities in Action

See how cities are implementing strategies to address these issues.

Contacting the NLC Economic Opportunity and Financial Empowerment (EOFE) Team

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