STATE LAW REQUIRES the governor to present the Legislature with an economic development strategy every four years. Crafted with input from a council of business and civic leaders, these plans establish priorities to help the Commonwealth maintain its competitive edge. Gov. Healey recently announced efforts to begin this economic development planning process during remarks to the industry group MassBio.
It’s notable that the governor broke the news before this audience. The life sciences industry is undoubtedly responsible for an outsized share of the state’s economic output. At the same time, it’s among the most challenging industries for Black and Latino entrepreneurs to enter. A strong economic development strategy must include a cohesive set of strategies to address large racial and ethnic gaps in business ownership, particularly in the industries of the future, like the life sciences.
An Act to Promote Inclusive Entrepreneurship, which the co-chairs of the Gateway Cities Legislative Caucus, Rep. Antonio Cabral and Sen. John Cronin, filed last session and again this year, contains provisions requiring the quadrennial economic development plan to include strategies that address racial and ethnic disparities in business ownership. While the bill is still under consideration, the Healey-Driscoll Administration doesn’t need a legal mandate to make equitable entrepreneurship a central pillar in its economic development plan.
As MassINC detailed in a 2021 research report, positioning all residents to successfully launch and grow small businesses is critical to future economic growth in our increasingly diverse Commonwealth. Equitable access to entrepreneurship is also essential to closing stark racial wealth gaps. Along with home ownership, business ownership is one of the main drivers of enormous racial and ethnic inequities in financial assets.
Gov. Healey has already shown leadership on strategies to help more people of color start small businesses, most notably, by proposing large funding increases to expand access to Early College and provide more state financial aid to students attending public colleges and universities. If they continue to be saddled with high levels of college debt, people of color will struggle mightily to bootstrap small businesses. But this is just one among many steps that the state can take to address a multifaceted problem.
Although Massachusetts led the nation in support to small businesses that lacked access to traditional lenders during the pandemic, the pandemic also exposed many of the systemic barriers that small businesses face, particularly small businesses owned by people of color. In general, it is hard to break into an established market, and oftentimes small and micro businesses lack access to traditional capital markets, hindering their growth even more.
Resources like the Small Business Technical Assistance (SBTA) Program allow community-based organizations to offer locally tailored, culturally competent, and highly effective technical assistance services to small businesses across the Commonwealth, setting them up to be successful and competitive in the future. Funding through sources such as Community Development Financial Institutions (CDFIs), which simply put are like mission driven banks, allow businesses that aren’t eligible for traditional lending to gain access to capital. Intentional policies around supplier diversity and procurement are another important tool to provide start-ups and small businesses with an entrée to break into very lucrative, and historically inaccessible, markets and the Commonwealth and its agencies should continue to improve in this area.
If Massachusetts is going to stay competitive and draw people to call our state home, we need to make sure that our economic focus isn’t just on the big businesses and sectors, like the life sciences, but the little ones too. Small businesses create place, and especially as we have become more virtual, that sense of place has become more valuable. Small businesses enrich our communities and provide people with a reason to choose our cities and towns as a home.
The economic development plan is an opportunity to develop a sound strategy to support entrepreneurs of color in an environment where accessing capital has become exceedingly difficult. Throughout the pandemic Black and Latino residents launched businesses at unprecedented rates with help from federal recovery funds. This entrepreneurial streak reversed a decades long decline in the rate of small business starts. With tightening credit markets, the state needs a sound plan to keep the growth trend for businesses of color moving in the right direction.
Efforts to grow and sustain specialized Small Business Technical Assistance providers and community development financial institutions will be integral to this component of the plan. During the pandemic Massachusetts outperformed because the Commonwealth has a rich patchwork of these two entities. But as noted, the pandemic also revealed how they struggle to meet the varying needs of entrepreneurs of color. To close gaps in business ownership, the field will need to grow significantly.
The economic development planning process will unfold quickly. The administration must file its strategy with the Legislature by December. The quick turnaround aligns with the urgent need for action to respond to both the federal infrastructure investment opportunities and increasing challenges in financial markets. The Healey-Driscoll strategy has the chance to provide a firm break with the past, when the needs of entrepreneurs of color were overlooked by policymakers until it was too late.
Kimberly Lyle is CEO of the Dorchester Bay Economic Development Corporation. Marc Dohan is executive director of NewVue Communities, a community development corporation in Fitchburg.Source: CW