A Guide to the Issue of Lack of Access to Capital

Access to capital is a crucial factor for the success of any individual or business.  

Unfortunately, it is one of the most common barriers to profitability for entrepreneurs and disproportionately affects entrepreneurs of color and female entrepreneurs.  

In this guide, we will explore the reasons behind this issue, some measures to address it, and steps entrepreneurs can take if they are having a difficult time accessing capital. 

This lack of access to capital refers to the limited availability of financial resources, such as loans, credit, or investment opportunities for individuals and businesses. This issue can arise due to various factors, including socioeconomic disparities, discrimination, limited financial infrastructure, or inadequate financial literacy. 

Not only does this barrier negatively affect the lives of many, it further stifles economic growth and personal empowerment. Capital is even more scarce for members of minority groups who are already more deprived of economic opportunity, thus fueling further inequity. 

Inequitable access to capital is an issue that needs to be met head-on and its persistence threatens our country’s future economic viability. 

So, what’s being done about it? 

The Small Business Administration (SBA) has implemented specific loan programs, delivered through certain non-profit lenders, that aim to reach populations more affected by this issue.  

Additionally, the Community Development Financial Institution Fund (CDFI Fund), was created, which sets aside federal funds each year to be deployed into communities that have historically been unable to access capital through traditional financial institutions. Addressing the issue of lack of access to capital was the primary reason for creating the CDFI Fund and will always be a priority for all CDFIs. 

Lastly, the Community Reinvestment Act was passed to help reverse the effects that Redlining had on our majority-minority communities and encourages banks to meet the financial needs of low- to moderate-income communities. Redlining was the deliberate act of denying members of low- to middle-income communities, which were generally majority-minority communities, access to affordable financing and insurance options. The federal government is updating the Act for the first time in almost 30 years, read more about the Act here.

If you are having trouble accessing capital, CDFIs and SBA programs are great primary options. Both offer favorable terms and often pair their affordable capital with technical assistance to help entrepreneurs make the most of their funding.  

Check out Opportunity Finance Network’s “CDFI Locator” to find a CDFI near you or check out some of Kansas City’s CDFIs here. 

Find a Kansas City CDFI that can help you, here. Or check out Opportunity Finance Network’s “CDFI Locator”, to find a CDFI near you.