A core element of the American Dream is that a person with a promising business idea can build personal wealth and employ others, thereby growing their local economy through increased jobs, tax revenues, and a sense of community. The US has more than 33 million small businesses that have created 17.3 million jobs, most of which are local. As small businesses succeed, their communities prosper.

But some aspiring entrepreneurs face a more difficult road to success. A third of new businesses fail within four years; the rate is worse for people of color, who are less likely to apply for and receive loans and whose loans tend to have higher interest and repayment terms than their white counterparts. In addition, because people of color are more likely to rely on personal funds and networks, business challenges can have greater negative effects on their personal wealth and economic mobility.

To support prosperity for entrepreneurs and their communities, public and private leaders can pursue strategies that expand access to capital and business networks. Two methods to improve small-business growth include

• expanding access to fair and favorable startup loans, and
• enhanced accelerator programs aimed at businesses with less access to networks and that provide capital to help them grow.

Supporting Small-Business Opportunities for All

Urban research shows that business ownership is the second-largest source of household wealth, after home equity. However, a 2023 survey found that more than two-thirds of small-business owners were concerned about their ability to access capital, and more than half felt they could not afford to take out a loan.

Can favorable loans promote small-business success in getting started?

Yes, by ensuring credit is given to equally qualified applicants. Current interest and repayment terms discourage many from accessing additional capital to support their new business. In addition, Black entrepreneurs are three times as likely as white entrepreneurs to forgo applying for loans or credit because they fear being denied, even when they have similar credit scores and net worth—and these fears are well-founded. In 2024, 39 percent of Black-owned businesses were denied loans, compared with 18 percent of white-owned businesses. 

By supporting Black entrepreneurs’ access to fair and favorable loans, public and private lenders can raise the floor of business ownership in their communities. These arrangements can include

• microloans with flexible underwriting for very small businesses,
• lower interest rates and longer repayment periods for mature small businesses,
• technical assistance and hands-on training for new lending relationships, and
• loans aimed at businesses in low- and moderate-income neighborhoods.

Along with more favorable loan terms, lenders can enact policies to address ongoing discrimination in lending decisions. In 2025, Perry, Stephens, and Donoghoe found that if credit scores for Black business owners were treated the same as scores for white business owners, credit lines for Black-owned businesses would double.

What support do small businesses need after receiving a loan?

Startup businesses working to transition into growing companies need access to investors, customers, and networks that provide the social and financial capital required for success. Accelerator programs that financially support and mentor start-ups over a short term can meet these needs. More than 140 accelerator programs operate nationwide, supporting thousands of businesses across many communities and industries. Participation in the program signals a business’s credibility and potential to investors and builds the essential skills for the next stage of growth. Accelerator program participants raised 50 to 170 percent more from startup investors than similar nonparticipating businesses. According to Seitz and colleagues, the best accelerator programs

• have larger cohorts with access to a shared workspace to amplify peer learning, networks, and resources;
• include post-program services to meet entrepreneurs’ longer-term needs; and
• blend public funding with sponsorship to enable better in-program offerings and expand reach outside the program.

These programs prime businesses for success by tailoring their assistance to participants’ needs. Chang and Assenova found that accelerators better meet the needs of all businesses by offering multiple mentorship tracks and preprogram training to narrow “pre-entry knowledge” gaps.

Policies in Action: Hope Credit Union and Cincinnati Business Accelerator

Hope Credit Union

Hope Credit Union played an important role in fortifying small businesses in Birmingham, Alabama. As part of the Bham Strong project, a public-private partnership that launched a $2.4 million emergency fund during COVID-19, it offered microloans of up to $25,000 to more than 600 small businesses. From March to July 2020, Bham Strong supported over 2,800 small businesses through capital or technical assistance, mitigating significant revenue losses and layoffs.

Hope Credit Union now offers loans up to $250,000, with low fixed rates, flexible repayment terms, and a wide range of allowable uses to small businesses across the Deep South. In 2024, it granted 4,196 loans totaling $204.5 million, primarily to clients who were previously unbanked/underbanked, had lower credit scores, and were operating in economically distressed areas. Although open to all, Hope prioritizes working with Black- and women-owned businesses, start-ups in underserved communities, and businesses in rural regions.

Cincinnati Business Accelerator

As of 2023, the Cincinnati Business Accelerator had a portfolio of over 60 underrepresented businesses that created more than 4,000 jobs, had $1.7 billion in annual revenue, and had average year-over-year growth of 24 percent for its portfolio companies. Buy-in and funding from major corporations in the region, such as Procter & Gamble, have been critical to its success. It was founded with a focus on supporting Black- and Latino-owned businesses, and its goals include closing the racial entrepreneurship gap. This program has become a national accelerator model, with 30 US cities exploring replication.