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Relief Efforts Important, But What’s Needed Is Systemic Change

The Biden Administration has taken several steps to increase access to funding new and small businesses need to survive the pandemic. While these moves are important, equally important is that we use this opportunity to rebuild better by creating an economy that works for everyone.

To do so policies must break down historic and systemic barriers so that all Americans, regardless of race, gender, and geography, can achieve economic stability, mobility, and prosperity.

When it comes to the issue of funding, most efforts to expand access to capital for entrepreneurs have focused on small business lending and venture capital — and none have produced the systemic change that’s needed. But there is hope ahead. As noted in the Kauffman Foundation’s “Access to Capital for Entrepreneurs: Reducing Barriers” report:

There are new, innovative strategies that work at the system level or offer alternatives to bank loans and venture capital. An emerging group of people — known as “capital entrepreneurs” — is advancing new vehicles to reduce the barriers entrepreneurs face in accessing capital. They are building more flexible models of capital formation, driving innovation within equity and debt structures, and piloting and developing new ways to source entrepreneurs and deploy capital. These include revenue-based investing, entrepreneur redemption, online lending, crowdfunding, and blockchain.

Government can support capital entrepreneurs and the businesses they invest in by incentivizing financial innovation. America’s New Business Plan calls on the President to lead a coordinated initiative across the federal government to close gaps in capital access for entrepreneurs everywhere by 2030. 

Among other actions government can lead on to expand access to capital, America’s New Business Plan recommends policymakers:

Incentivize financial innovation that addresses gaps in capital access by spurring the creation of a new generation of funding models and technologies that serve all types of new businesses, especially those currently underserved by the capital marketplace.

Reforms that address the underlying impacts of systemic barriers, as well as those more immediately related to starting a business, will lead to broad-based transformation that unleashes the full potential of all of America’s entrepreneurs.

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