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Access to Capital for Entrepreneurs: Removing Barriers (2023)

The Kauffman Foundation continues to recognize, with urgency, the significance of the role new and existing businesses play in local, regional, and the national economy. This report continues our series of sharing the state of capital access for entrepreneurs highlighting the need for innovative products and models to improve capital delivery systems.

Written by Brendan Cosgrove, Philip Gaskin, Thomas Goff, Erin Kenney, Jessica Milli, PhD and Hyacinth Vassell

Related

Report: Access to Capital for Entrepreneurs: Removing Barriers (2019) >

Report: Access to Capital for Entrepreneurs: Removing Barriers (2021) >

Initiative: Capital Access Lab >

In 2019, the Ewing Marion Kauffman Foundation published Access to Capital for Entrepreneurs: Removing Barriers, a report which presented a landscape analysis of the capital ecosystem. The report highlighted the need not only for increased funding of companies led by marginalized founders, but also the need to build up critical market infrastructure. This could be done through promoting greater diversity of investment vehicles.The report closed by posing a set of guiding questions for policymakers, program leaders, philanthropists, and other stakeholders to consider as they continue to work toward greater and more equitable access to capital for entrepreneurs.

Since then, we have undertaken a number of efforts to dismantle the barriers that many entrepreneurs face in starting and growing a business. These investments have shown early promise, but there is still more work to be done.

The present report, Access to Capital for Entrepreneurs: Removing Barriers (2023), updates the data describing the national capital access and entrepreneurial support landscape that was originally presented in the 2019 report, while also layering in data from new sources that provide greater context into the experiences and challenges facing entrepreneurs in today’s economy. This report includes additional data describing the capital access landscape in the Kansas City metropolitan area and in the Heartland states (Iowa, Kansas, Missouri, and Nebraska). A number of our recent capital access investments have been targeted there, which we highlight throughout the report.

What to expect from the full report

The report cover for "Access to Capital for Entrepreneurs: Removing Barriers (2023 Update)"
  • A deep dive into the current state of funding access for entrepreneurs, especially women and entrepreneurs of color.
  • What the presence and availability of funding and financing sources in the Kansas City metropolitan area looks like for entrepreneurs — bank branches, minority depository institutions (MDIs), community development financial institutions (CDFIs), credit unions, traditional small business loans, traditional small farm loans, the U.S. Small Business Administration (SBA) and 504 loans, and venture capital (VC).
  • The size of the lending gap that exists in Kansas City.
  • How COVID-19 impacted the entrepreneurial landscape.
  • The importance of lender diversity, alternative lenders, and equitable access to funding.
  • Additional areas of support for entrepreneurs beyond capital access to ensure the success and growth of businesses.
  • A call-to-action: What policymakers, program leaders, and philanthropy can do to address the need for changes to policies and practices that continue to leave many businesses at a disadvantage.

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Capital access, by the numbers

A page from the Access to Capital for Entrepreneurs: Removing Barriers (2023 At-a-Glance) infographic
  • 83% of new businesses with employees nationally and 82% in the Kansas City metropolitan area don’t access capital from banks or other financial institutions.
  • 65% of business owners with employees nationally and 61% in Kansas City tap into their personal or family savings.
  • Nearly two-thirds of new businesses will rely on personal or family savings to cover at least some of their start-up costs.
  • Each year, 14% of established businesses with employees will need additional capital, but nearly half of these businesses will choose not to apply for it.
  • The business financing system is letting Black entrepreneurs down – just 16% of Black-owned businesses’ financing needs are met.
  • 90% of new businesses will need capital at start-up. 17.2% of white-owned businesses receive loans from banks or financial institutions compared to 11.4% of Latino-owned businesses, 14.3% of Black-owned businesses, and 14.3% of Asian-owned businesses.

From 2019 to 2021:

  • The share of Black-owned businesses whose financing needs were met dropped 8.8 percentage points, from 24.9% to 16.1%.

  • The share of Asian-owned businesses whose financing needs were met dropped 6.1 percentage points, from 30.7% to 24.6%.

  • The share of white-owned businesses whose financing needs were met dropped 5.6 percentage points, from 53.5% to 47.9%.

  • The share of Latino-owned businesses whose financing needs were met dropped 2 percentage points, from 29.6% to 27.6%.

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