Are grants for minority business owners in jeopardy?

Historically, Black female entrepreneurs and minority business owners have faced significant hurdles in securing business capital.

Amid these challenges, the Fearless Fund emerged as a beacon of hope. Since 2018, the organization offered business grants for Black women through its Fearless Strivers Grant Contest and provided much-needed financial support. But a recent lawsuit has cast a shadow of uncertainty over these efforts, jeopardizing progress thus far.

What is the Fearless Fund?

Arian Simone and Ayana Parsons founded Fearless Fund in 2018. The Atlanta-based organization addresses the lack of access to venture capital for women of color entrepreneurs, offering grants, mentorship and resources.

Over the years, its Fearless Strivers Grant Contest has supported numerous Black women entrepreneurs in their journey toward success. This program awards $20,000 grants four times a year, contributing to the growth and development of these Black women-led businesses.

With heavy-hitter investors and partners, including Mastercard, Bank of America, PayPal and JPMorgan Chase & Co., the Fearless Fund supports Women of Color and Hispanic Heritage Month grants. It also invests in early-stage, high-growth companies nationwide through its Fearless Pitch Contest.

Additionally, women of color business owners can apply for and participate in the Get Ready Venture Program, which is a 12-week intensive training program focused on acquiring the training, knowledge and skills needed to gain access to capital.

Why is the Fearless Fund Being Sued?

According to The Washington Post, the American Alliance for Equal Rights (AAER), led by Edward Blum, filed a lawsuit with the U.S. District Court in Atlanta against the Fearless Fund in August.

Blum, who spearheaded the overturning of affirmative action in higher education, alleges the Fearless Fund engages in racial discrimination by limiting its Fearless Strivers Grant Contest to Black women entrepreneurs. The lawsuit cites explicitly a violation of Section 1981 of the 1866 Civil Rights Act, which makes it illegal to consider race when making or enforcing private contracts.

Appeals court pauses grant

On September 30, 2023, the 11th U.S. Circuit Court of Appeals granted a request by the American Alliance for Equal Rights to temporarily block the Fearless Fund from awarding its $20,000 grant.

The two judges in the majority agreed the grant was “racially exclusionary” and may violate the 1866 Civil Rights Act, which bars racial discrimination in contracting. The one dissenting judge disagreed, writing that the AAER’s use of Section 1981 in its claim against a fund meant to help women of color bridge the gap in access to venture capital was a “perversion of Congressional intent.”

How the Fearless Fund lawsuit impacts minority business owners

This lawsuit could have far-reaching consequences on the Fearless Fund and other organizations working to address disparities in access to capital.

It’s seen as an attack on equity initiatives across the country and has the potential to undo decades of efforts to level the playing field and foster growth for minority entrepreneurs. This includes initiatives to provide business loans to minorities. Without these dedicated resources, Black female entrepreneurs and other minority business owners may struggle to keep the doors open.

Why access to capital for Black women and other minorities matters

For years, access to capital, networks and opportunities has been limited for Black female entrepreneurs and minority business owners. Single Black women are 24 times less likely to be business owners than white men. And less than 1 percent of Black women entrepreneurs receive venture capital.

With little-to-no access to capital, Black women are more likely to bootstrap their businesses with personal savings or use credit cards. While they are the fastest-growing demographic in the country, securing traditional small business financing is not always an option, thanks to credit market challenges, according to the Goldman Sachs 2022 Black Womenomics report.

With discriminatory policies and limited opportunities perpetuating inequality, various organizations like the Fearless Fund launched to provide grants, mentorship and resources to allow minority business owners to thrive. Grants for minorities have been a lifeline for businesses that can’t get traditional funding or don’t want to take on debt.

Bottom line

The Fearless Fund remains committed to supporting women of color entrepreneurs. Arian Simone is confident they will defeat this lawsuit and told CBS Mornings they plan to fight back against this “attack to dismantle and address our economic freedom as people of color.”

Among its supporters is Damon Hewitt, President and Executive Director of Lawyers’ Committee for Civil Rights Under Law, who, in an Amicus brief recently filed, called the lawsuit an attempt to “kneecap any effort to undo entrenched racial inequalities and further cement the status quo of inequitable market access.”

Frequently Asked Questions

• What is the mission of the Fearless Fund?

  The Fearless Fund’s mission is to address disparities in venture capital funding for women of color entrepreneurs, encouraging the building and growth of their companies.

• How big is the Fearless Fund?

  Since its founding in 2018 by Arian Simone and Ayana Parsons, the Fearless Fund has grown to be a $42 million seed fund, staying true to its mission of encouraging the growth of minority, women-owned businesses.

• Why is it harder for minorities to get small business loans?

  According to the national think tank Third Way, getting small business loans is more challenging for minorities due to several factors, including

  • Branch closures in underserved communities
  • Little to no collateral options to secure small business loans
  • Stringent lending requirements
  • Limited business relationships with banks
  • Low incentives for small business loans