The Black Entrepreneurship Program

A Review of the Black Entrepreneurship Fund

The Black Entrepreneurship Program (BEP) was borne out of the partnership between the Government of Canada (GOC), Black-Led business organizations, and financial institutions across Canada. To date, an investment of up to $350.8 million has been put forward by the GOC and financial institutions to support the BEP over the next fours years[1]. The thrust of the BEP is to support Canadian business owners and entrepreneurs to grow their businesses and become part of the mainstream Canadian economy through social-economic gainful contributions in employment and social participation. A recent report which summarized the outputs of a wide-ranging consultation by the Innovation, Science and Economic Development Canada to the Black communities emphasized the need to support Black entrepreneurs as they recover from the COVID-19 induced impacts. Hence, the BEP seeks to create an ecosystem for the Black community along the three main pillars as listed below;

i. Money to create a National Ecosystem Fund (NEF) for Black-Led organizations. To date up to $50 million has been invested in this Fund;

ii. The Government of Canada to contribute money together with financial instructions across Canada to support Black-led projects. At the present, about $158 million split as $30 million investment from GOC and $128 million from participating financial institutions have been availed towards this cause. The Royal Bank of Canada has contributed $100 million to support black-led businesses with loans of up to $250, 000 and a mentorship hub to mentor and design business training for the community to tap into.

iii. The creation of Knowledge Hub. The Knowledge Hub has so far been allocated $5 million towards accelerating research on Black empowerment in collaboration with partners such as non-profits and universities across Canada.

Context of the main pillars of the Black Entrepreneurship Program
1. Black Entrepreneurship Loan Fund

This is a collaboration between the government of Canada and Black-led organizations and several financial institutions such as RBC, BMO Financial Group, CIBC, National Bank, TD, Vancity, and Alterna Savings. The goal is to provide funds for business development through loans of up to a maximum of $250, 000 to black entrepreneurs and business owners. The loans are accessible through the Federation of African Canadian Economies (FACE). The Eligibility criteria have three factors as listed below;

i. Individuals who self-identify as Black or organizations with at least 51% of the shareholding under the control of Black Canadians;

ii. The would-be beneficiaries should be legal residents of Canada such as Permanent Resident or refugees who can only access small loans;

iii. Beneficiaries to have celebrated at least their 18th birthday.

2. The National Ecosystem Fund

The National Ecosystem Fund (NEF) was created to build the capacity of Black-led business organizations to grow. The NEF seeks to achieve socio-economic inclusion and development to the Black Canadian communities through a sequence of deliberate measures such as mentorship, training in financial planning, and business management of the Black entrepreneurs. The measures are important to build capacity for the black communities to build sustainable businesses and contribute to the economic development of the Canadian economy.

3. Black Entrepreneurship Hub

The Black Entrepreneurship Knowledge Hub was set up to be a conduit for conducting research on Black Entrepreneurship in Canada. The issues to be researched include investigating the barriers and opportunities for growth driven by the Black communities. The research is being done in collaboration with Black-led nonprofits and business partners in collaboration with educational institutions.

Frequently Asked questions from government website

Since the Black Entrepreneurship Program is still in its infancy, there have been lots of questions that have popped up. Below, I outline the main question that is available on the government website.

1. What is the Black Entrepreneurship Loan Fund?

The Black Entrepreneurship Loan Fund is a part of the Black Entrepreneurship Program (BEP) which is a partnership between the Government of Canada, Black-led business organizations, and financial institutions. The loan fund is now an investment of $291.3 million to support the growth of businesses and entrepreneurship ventures being run by people from the Black community. To enable the BEP to progress smoothly, resources have been available. So far, the Government of Canada has invested over $33.3-million in the first phase of the program, with $130 million being contributed by the Business Development Bank of Canada (BDC). Various financial institutions such as the BDC, Vancity, and Alterna Savings are the first partner financial institutions in the launch of the signature Loan Fund.

In addition, a further $128 million investment has been committed for the second phase of the BEP  with major financial instructions such as the Royal Bank of Canada, BMO Financial Group, Scotiabank, CIBC, the National Bank of Canada, and TD Bank making contributions to this cause. The Royal Bank of Canada for instance has committed $100 million over the next five 5 years towards funding small businesses through loans to black entrepreneurs. The RBC investment is split into two components namely the Black Entrepreneurship Start-up program and Black Entrepreneurship Loan Fund. The underlying goal is to enable economic growth and wealth creation in Black Canadians through financial inclusion, mentorship, and access to funding. The RBC bank also provides a platform for the black community to engage and learn from a successful community of entrepreneurs. The fund will provide loans of up to $250,000 to support Black business owners and entrepreneurs across Canada and lay the foundation for future success and long-term change.

2. How is the loan fund connected to other components of the Black Entrepreneurship Program (BEP)?

The Loan fund has two components. First the loans from instructions and other partners such as the government of Canada. The loan fund is anticipated to contribute to an ecosystem of measures that include the National Ecosystem Fund section of the BEP, which aims to provide advisory services to Black-led businesses to help them build their businesses. Economic empowerment requires that the Black communities be economically educated to better run their entrepreneurial ventures and business just like the rest of the businesses in the mainstream economy.

The second component of the BEP entails the development of the Knowledge Hub which aims to stimulate data-driven outputs informed by best practices from research. As noted in the summary of the Innovation, Science and Economic Development Canada (ISED report of 2021, the knowledge hub would foster the gathering of relevant and much-needed information to inform partners and policymakers as well as the black communities. The key is to build a trajectory of trust in how these data are kept and used along the way. Trust can take time to build but a few seconds to destroy hence the need to come up with bases standards for data and privacy in the process of research and development of the Knowledge Hub.

3. Which entity will administer the Government of Canada’s contribution to the loan fund?

There are partners who administer the loan funds including the Federation of African Canadian Economics (FACE) which is the legal entity designated to administer the government contribution to the loan fund. The FACE is a federally incorporated not-for-profit that was formed by a consortium of Black business support organizations (BBSO) from across Canada.

4. Which organizations make up the Federation of African Canadian Economics (FACE)?

The FACE comprises five prominent BBSOs that came together and formed the organization. The group has more than 35 years of experience altogether working with Black Canadian business communities. The founding members are:

5. Who will partner with FACE in delivering the loan fund?

The Business Development Bank of Canada (BDC) has invested $130 million to provide access to capital to the Black entrepreneurs through loans. As a Crown corporation, the BDC has a history of serving Canadian entrepreneurs since 1944. The BDC actively acts as a conduit for supporting access to funding to underserved sectors, regions, and entrepreneurs of the Canadian economy.  The BDC has expertise, knowledge, and capacity gained over time that helps to work with FACE in administering the loan fund. FACE will seek to work with other financial institutions as partners in due course.

6. What is the microloan pilot program?

The microloan pilot project is an important building block for the BEP. So far, Alterna Savings and Vancity credit unions will be partnering with FACE to deliver a microloan pilot program under the loan fund, administering microloans from $10,000 to $25,000 to Black entrepreneurs in Ontario and British Columbia. Credit unions have long served underserved entrepreneurs, helping them become economically and socially empowered. Credit unions have a deep understanding of community loan funds, and Alterna Savings has done so through its 20-year Community Microfinance Program. The Government of Canada and FACE look forward to seeing the success of this pilot and look forward to welcoming other financial institutions to deliver microloans across Canada.

7. What is the role of the delivery partners at the outset? What about their future role?

The Business Development Bank of Canada will work with and support FACE in ensuring the initial set of loan products are delivered in a timely manner to Black Canadian business owners and entrepreneurs. It will provide advice and resources and collaborate with FACE on the loan approval model that will serve the Black Canadian business community.

At the outset, the Business Development Bank of Canada will commit $130 million in capital to partner with FACE and act as a fulfillment agent for the loan fund. Alterna Savings and Vancity will also participate in a microloan pilot program under the loan fund, administering loans of between $10,000 and $25,000 to Black entrepreneurs. FACE and the Government of Canada look forward to onboarding additional financial institutions as partners in the coming months and will continue to work together to better serve Black Canadian business owners and entrepreneurs.

8. Why did the Government of Canada create a loan fund specifically for Black entrepreneurs and business owners?

Black Canadian business owners and entrepreneurs make important contributions to the Canadian economy, yet they continue to face systemic barriers in starting and growing their businesses. This has been further exacerbated by the COVID-19 pandemic. The Government of Canada is working to address these long-standing, systemic barriers with its first-ever Black Entrepreneurship Program.

The loan fund is an important step in helping Black business owners and entrepreneurs get the financial support they need so they can start up, scale up and grow across Canada and the world.

1. What businesses are eligible under the loan fund?

Eligible businesses may include start-ups and existing for-profit small businesses in Canada. Such businesses can be corporations or sole proprietors and for-profit social enterprises. Businesses must have a business plan, business registration, and recent financial statements or financial projections for start-ups.

Any Black business owners and entrepreneurs with questions are encouraged to reach out to FACE for further details.

2.  What businesses are not eligible under the loan fund?

Not-for-profit organizations are not eligible for loans.

3. What is eligible for financing under the loan fund?

Loans can be used for the following:

i. Capital investments. This includes buying equipment, leasehold improvements, property improvement, office equipment for business use;

ii. Working capital such as building inventory, payroll, lease payments, accounts management, rent, and overhead costs;

iii. Short-term receivable financing (i.e., financing to service a contact).

4. What is not eligible for financing under the loan fund?

Loans cannot be used to finance items such as goodwill, restructuring conventional business-related debts, dividend payout, shareholder loan repayment or issuance, bonuses, stock buybacks, option issuance, or an increase to shareholder or management committee compensation.

Loan criteria
1. How much can be financed and what is the maximum loan amount I can access under the Black Entrepreneurship Loan Fund?

The loan fund will offer loans up to $250,000. FACE can provide loans of up to $100,000. Loans above this amount will be risk shared with the Business Development Bank of Canada. Alterna Savings and Vancity, under the microloan pilot program, will offer loans between $10,000 and $25,000.

2. Who will process the loan applications?

The processing of loans is shared between FACE and the Business Development Bank of Canada. FACE is the initial entry point for all Black-owned enterprises interested in applying for a loan. Loan applications will be reviewed by FACE, and the underwriting (fulfillment) process will be shared by the Business Development Bank of Canada.

How to apply
1. Where can I apply for the Black Entrepreneurship Loan Fund?

The FACE loan portal, accessible at the Federation of African Canadian Economics (FACE), will act as the electronic and initial intake process for interested applicants. Loan applicants will be able to submit and communicate with a FACE client relationship manager on the progress of their loan request.

2. When will applications begin to be accepted?

The loan fund will start accepting applications on May 31, 2021.

3. How long will it take to turn around applications?

FACE is committed to turning around applications in a timely manner. Time for turnaround will depend on the type of applications received and the due diligence that is required by the loan administrator and the Business Development Bank of Canada. As a result, the timelines will vary based on individual circumstances.

4. How will entrepreneurs served by other BBSOs get access to the loan fund?

The FACE model is inclusive. It is designed in a way to allow other BBSOs from across the country to participate in the evolution of the entity and submit loan applications for consideration. This ensures Black Canadians, irrespective of where they live and which BBSO they may work with, have an opportunity to access loans from the fund.

5. If I cannot access financing under the Black Entrepreneurship Loan Fund, where can I go for additional information?

FACE intends to refer applicants whose loan application was not approved to corresponding regional FACE member organizations and affiliates for further capacity building to support their reapplication at a later time. Another option could be to visit the Government of Canada’s Business Benefits Finder to explore funding and other support options that might better suit your needs. Regional development agencies also provide a variety of business support services, including the delivery of the National Ecosystem Fund component of the Black Entrepreneurship Program.

Concluding remarks

The review of the Black Entrepreneurship explored the three pillars of the initiative and provided some answers to the Frequently Asked Questions that are available on the Federal government website. The three pillars of the BEP include the National Ecosystem Fund, the Loan Fund, and the Knowledge Hub. All in total, over $350.8 million will be distributed over the next four years towards supporting the BEP. While this is a great start for the Black-led businesses and the Canadian economy in general, it is also imperative that those who will receive the money have the requisite skills to manage the funds and hence be poised for success. Also, key pieces on the interest rates of the loans need to be implored to ensure that the Black-led business owners get a preferable rate to narrow the gap that was previously created by the systematic barriers to access loans in the past. In addition, extending the loans to black business owners without proper research and support may end up burdening their beneficiaries with loads of odious debt, which can even result in them being worse off than before they took up the funds. Thus, the knowledge hub needs to quickly conduct research and provide a strong foundation for the implementation of the BEP. Immediate steps that can be taken and built upon those that are currently available include designing mentorship hubs, entrepreneurship business training seminars tailor-made to meet the needs of black entrepreneurs. Another important step is to consult the black communities widely with a purpose to understand what they think should be done to use this fund. The Innovation, Science and Economic Development Canada (ISED) has already consulted Black Canadian communities and initial discussions include the need to remove systematic barriers faced by black communities. Too often, solutions lie in the grassroots as they have lived experiences which some policymakers may not have. The ISED report noted the need for a suite of solutions to help black Canadians succeed through effective training, coaching, and capacity building. The need for helping entrepreneurs to have access to data also came out. Having access to data can help educate the black communities and also share success stories to motivate and learn from others who have recovered business successes.  The ISED also produced a feedback loop that black communities would want to build trust with government and partnerships in the funding ecosystem to ensure that the collated data is protected under relevant privacy laws. The need to remove systematic barriers that black communities face was also highlighted from the conversation with black communities through the ISED research. Black Canadians included in positions of power such as executive and senior management roles. This is important for economic empowerment.