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Entrepreneurship and credit unions: a pathway to economic equity in the United States

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Entrepreneurship and credit unions: a pathway to economic equity in the United States

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Content Entrepreneurship and Credit Unions:
A Pathway to Economic Equity in the United States
Paul Buren Hutchison III
Rossier School of Education
University of Southern California
A dissertation submitted to the faculty
in partial fulfillment of the requirements for the degree of
Doctor of Education
May 2024

© Copyright by Paul Buren Hutchison III 2024
All Rights Reserved

The Committee for Paul Buren Hutchison III certifies the approval of this Dissertation
Marcus Pritchard
Esther C. Kim
Cathy Sloane Krop, Committee Chair
Rossier School of Education
University of Southern California
2024

iv
Abstract
The racial wealth gap between White and Black households in the United States is a persistent
issue that has not significantly improved in the last 70 years. Research shows business ownership
is a potential pathway to closing this gap. Unfortunately, the same inequities in the U.S. financial
system that negatively affect Black households also create roadblocks for Black entrepreneurs
starting and growing businesses. This qualitative study presents an in-depth examination of the
challenges faced by Black entrepreneurs and how credit unions could be a positive force in
breaking through the systemic inequities that prevent Black-owned businesses from thriving.
Using Bronfenbrenner’s ecological systems theory as a framework, the study explores how
influences across the layered systems influence the success or failure of Black-owned businesses.
The study engaged Black entrepreneurs and credit union executives to explore three key topics:
(a) the best practices successful Black business owners used to navigate the U.S. financial
system, (b) the factors potentially limiting credit unions’ engagement with Black entrepreneurs,
and (c) the services credit unions should offer to address the unmet needs of Black entrepreneurs
as they start and scale businesses. The findings from the qualitative data synthesized with
relevant prior research formed the basis for three recommended actions that credit unions should
take: (a) establish personal banking relationships, (b) deliver business and credit readiness
education, and (c) act with purpose-driven intentionality. Executing against these three
recommendations, credit unions can potentially improve outcomes for Black entrepreneurs
starting BOFs and begin closing the racial wealth gap.
Keywords: racial wealth gap, Black entrepreneurship, financial inequity, credit union,
financial services, business banking, NCUA, systemic racism

v
Dedication
To my family, whose unwavering support was the foundation that made this academic journey
possible.
To my parents, you instilled values that made me want to make the world a better place and a
work ethic that saw me through the times when it felt like the load was too heavy.
To my children, you are the inspiration that gives my life and this academic pursuit purpose.
To Melissa, whose steadfast belief in me was my guiding light through the challenges of doctoral
studies. Your love and support made this achievement possible; I am forever grateful.

vi
Acknowledgments
It would be impossible to mention everyone who made this academic journey possible.
No one completes a dissertation in a vacuum. I was fortunate to be surrounded by an exceptional
scholarly and business community. I deeply appreciate the EdD OCL faculty, who stretched my
thinking and made this journey a wonderful and fulfilling experience. I am also grateful for my
fellow Cohort 20 mates, who encouraged me when I struggled, engaged in scholarly debate to
stretch my perspective, and brought real-world substance to the work. This journey would not
have been the same without this learning community.
I was also blessed to be surrounded by a business community that supported my studies
and provided meaningful insights into my research. I owe a special thanks to Tom Berquist, who
helped me network in the credit union space and is a role model executive. I am also thankful for
Doug Marshall, who was a sounding board during my research and provided incredible insights
into the art of the possible when it comes to serving historically marginalized communities.
Most importantly, I want to express my deepest gratitude to my dissertation committee,
Dr. Cathy Krop (Chair), Dr. Esther Kim, and Dr. Marcus Pritchard. I consider myself incredibly
fortunate to have had the opportunity to work with such brilliant minds. I am particularly
indebted to Dr. Krop, my dissertation chair, for her wisdom, encouragement, and expert
guidance. Her support was instrumental in my research, and I would not have completed this
journey without her. Dr. Kim’s insights into qualitative research, people observation, and
learning from others improved my dissertation and changed how I view the world. Dr.
Pritchard’s encouragement to tackle “the combo platter” caused me to take my studies to a new
level. He inspired me to not only go deeper but cast a wide net. I am constantly amazed at his
ability to turn around a 100+ page document with meaningful edits seemingly instantaneously.

vii
Table of Contents
Abstract.......................................................................................................................................... iv
Dedication....................................................................................................................................... v
Acknowledgments.......................................................................................................................... vi
List of Tables ................................................................................................................................. ix
List of Figures................................................................................................................................. x
Chapter One: Introduction to the Study.......................................................................................... 1
Background of the Problem ................................................................................................ 2
Field Context and Mission.................................................................................................. 3
Purpose of the Study and Research Questions.................................................................... 4
Importance of the Study...................................................................................................... 5
Overview of Theoretical Framework and Methodology .................................................... 7
Organization of the Dissertation ......................................................................................... 9
Chapter Two: Literature Review .................................................................................................. 11
Inequities in the U.S. Banking System Rooted in Systemic Racism................................ 11
Closing the Wealth Gap: Black-Owned Employer Firms as a Pathway........................... 17
Credit Unions.................................................................................................................... 22
Conceptual Framework..................................................................................................... 27
Summary........................................................................................................................... 31
Chapter Three: Methodology........................................................................................................ 32
Methodology, Research Questions, and Data Sources ..................................................... 32
Participants........................................................................................................................ 37
Data Collection and Instrumentation ................................................................................ 38
Data Analysis.................................................................................................................... 42
Credibility and Trustworthiness........................................................................................ 43

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Ethics................................................................................................................................. 46
Chapter Four: Results and Findings.............................................................................................. 48
Participants........................................................................................................................ 49
Research Question 2: Credit Union Influencers ............................................................... 68
Research Question 3: Supportive Actions ........................................................................ 78
Summary......................................................................................................................... 100
Chapter Five: Discussion and Recommendations for Practice ................................................... 101
Black Entrepreneurs Journey Through the Lens of Bronfenbrenner’s EST................... 102
Recommendations for Practice ....................................................................................... 112
Limitations and Delimitations......................................................................................... 119
Recommendations for Future Research.......................................................................... 120
Conclusion ...................................................................................................................... 122
References................................................................................................................................... 125
Appendix A: Interview Protocol Panel 1.................................................................................... 135
Appendix B: Interview Protocol Panel 2 .................................................................................... 139

ix
List of Tables
Table 1 Difference Between Banks and Credit Unions 26
Table 2 Data Sources 36
Table 3 Panel 1 Panel and Business Demographics 51
Table 4 Panel 2 Participant Demographics 52
Table 5 Credit Union Field of Membership and Mission 53
Table 6 Best Practices When Starting and Sustaining a Business 54
Table 7 Panel 1 Findings Alignment to Concepts Identified in the Literature Review 55
Table 8 Advice on Financial Readiness From Ethan and Evan 60
Table 9 Challenges Shared by Panel 1 Participants When Starting Their Business 66
Table 10 Panel 2 Findings Alignment to Concepts Identified in the Literature Review 68
Table 11 Credit Union Impediments to Delivery Banking Services to Black Entrepreneurs 69
Table 12 How Credit Unions Can Help—Emerging Themes 79
Table 13 What Can Credit Unions Do to Support BOFs, and How Can They Do It? 80
Table 14 Credit Union Executives’ View on Personal Business Banking Relationships 95
Table 15 Panel 1 Participants Influenced by Close Relationships 104
Table 16 Participant Views and Experience with Racism in Banking 110
Table 17 Recommendations Relationship to Findings 112

x
List of Figures
Figure 1 Bronfenbrenner’s Ecological Model for Black Entrepreneurs 8
Figure 2 A Bronfenbrenner’s EST View of Influences on Black Entrepreneurs 28
Figure 3 Black Entrepreneurs’ Journey to Start and Grow Employer Businesses 30
Figure 4 Methodology, Research Questions, Data Collection, and Instrumentation 34
Figure 5 Data Collection and Analysis Process 39

1
Chapter One: Introduction to the Study
Inequities in the U.S. banking system create roadblocks for Black entrepreneurs seeking
the financial services they need to start and grow employer businesses. The unbanked and
underbanked rates for Black versus White households are one symptom of these inequities.
According to the Board of Governors of the Federal Reserve Banking System (FED), in 2021,
only 59% of Black households could meet all their banking needs with mainstream financial
institutions (FI), while 87% of White households could meet all of their financial services needs
(FED, 2022). According to the 2019 Federal Deposit Insurance Corporation (FDIC) banking
survey, the unbanked statistics show even more disparity, with Black households nearly 5 times
more likely to be unbanked than White households (FDIC, 2020). Being unbanked or
underbanked increases dependence on fringe financial services, which restricts access to
reasonably priced credit (The PEW Charitable Trust, 2022), perpetuates financial exclusion, and
contributes to ongoing conditions that keep families in poverty (Bullock et al., 2020). The
inequities in the U.S. banking system affect Black households at the individual level and create
roadblocks for Black entrepreneurs when they seek financial services support to start or scale a
business.
The roadblocks Black entrepreneurs face are evident in the outcomes experienced by
Black-owned employer firms (BOF) when they seek financing (Bates & Robb, 2015; U.S.
Census Bureau, 2022; Wiersch & Misera, 2022). A 2022 FED report indicated that only 16% of
BOFs received 100% of the bank financing they sought in 2021, while 35% of White-owned
employer firms (WOF) received 100% of their requested financing (Wiersch & Misera, 2022).
Further evidence of the problem is seen in the 2022 U.S. Census Bureau Small Business Credit
Survey, which showed that 20.7% of BOFs received 0% of the credit they sought in 2020, while

2
WOFs had better outcomes with only 10.1% not receiving any of their requested financing (U.S.
Census Bureau, 2022). The rate of repayment forgiveness of federal aid also shows the inequities
experienced by BOFs. In 2021, WOFs were twice as likely as BOFs to receive 100% repayment
forgiveness (U.S. Census Bureau, 2022). The barriers experienced by Black entrepreneurs when
seeking financing negatively impact the founding and scaling of BOFs (Holguin et al., 2022;
Perry et al., 2021).
Background of the Problem
The inequities in the U.S. banking system creating roadblocks for Black entrepreneurs
have roots in the systemic racism embedded in the broader U.S. financial system. Baradaran
(2017) pointed to the commerce system created by slavery as one of the origins of the U.S.
financial system’s built-in racism. In pre-Civil War America, enslaved people had no economic
rights, and even free Black people could not legally hold property or accumulate wealth
(Baradaran, 2017; Derenoncourt et al., 2022). Despite efforts by lawmakers and regulators to
address the legacy of racism in the U.S. financial system, Black households still suffer inequities
across most critical economic measures (Aladangady & Forde, 2021; FDIC, 2020; FED, 2022).
The inequities in the U.S. financial system result in a wealth gap between Black and White
households (Aladangady & Forde, 2021).
The wealth gap between Black and White households in the United States is a broad
indicator of the inequities in the U.S. financial system. A 2019 FED report noted White
households held 86.9% of the overall wealth in the country, while Black households, who made
up 13.6% of the U.S. population, held only 2.9% of the country’s wealth (Aladangady & Forde,
2021). While not broadly distributed, ownership of an employer business is one factor that drives
wealth accumulation in the United States (Bhutta et al., 2020; FED, 2021). The average net

3
worth of non-business owners in 2019 was $392,100, but owners of businesses had a net worth
of $1,327,500 for businesses under five employees and $3,479,500 for businesses over five
employees (Bhutta et al., 2020; FED, 2021). While business ownership could equalize the wealth
gap, Black-owned businesses only make up 2.2% of the employer businesses in the United States
(Perry et al., 2021; Perry & Romer, 2020). The inequities in the U.S. banking system drive the
underrepresentation of BOFs in the United States.
Many early-stage BOFs have unmet financial capital needs (Fairlie et al., 2022; U.S.
Census Bureau, 2022). A 2021 McKinsey and Company report noted that BOFs’ difficulty
obtaining capital makes it difficult to access other types of financial support when needed
(Baboolall & Fitzhugh, 2021). BOFs were more likely than any other group to be denied credit in
the United States in 2019 (U.S. Census Bureau, 2022). Fairlie et al. (2022) noted a compounding
impact of Black-founder credit issues extending into credit challenges for the business. Inequities
rooted in systemic racism have persisted to a current state where Black households and Blackowned businesses face roadblocks to economic parity and business ownership.
Field Context and Mission
This study explores the role credit unions could play in addressing the inequities Black
entrepreneurs face in seeking the financial services they need to start and grow employer
businesses. The origins of credit unions are rooted in their role as community banks and their
commitment to promoting thrift and lending within underserved communities. The first credit
unions can be traced back to 1849, when Friedrich Raiffeisen established the credit society in
southern Germany (McKillop & Wilson, 2011; MyCreditUnion.gov, n.d.; Richard, 2015). The
theory behind these early credit unions was that they held a distinct information advantage over
larger FIs because they operated in and connected with the local community (McKillop &

4
Wilson, 2011). From humble beginnings in the early 1900s, credit unions established themselves
as an essential part of the U.S. banking infrastructure (National Credit Union Administration
[NCUA], 2022a). As of March 2022, there were 4,903 federally insured credit unions in the
United States, with $2.12 trillion in net assets under management and over 131 million members
(NCUA, 2022b).
In addition to being an essential part of the U.S. banking infrastructure, credit unions also
play a significant role in addressing inequities in the financial system. Credit unions are not-forprofit and operate to promote the well-being of their members (MyCreditUnion.gov, n.d.). This
unique set of attributes differentiates credit unions from other financial services companies. The
focus aligns credit union goals with member success. The NCUA, the federally insured credit
union regulating body, stresses these unique values with its vision statement. The NCUA vision
is to “strengthen communities and protect consumers by ensuring equitable financial inclusion
through a robust, safe, sound, and evolving credit union system” (NCUA, 2022c, Vision section,
para. 1). The NCUA’s focus on strengthening communities and ensuring fair financial inclusion
creates a mandate for credit unions to attack the inequities in the banking system creating
roadblocks for Black entrepreneurs as they seek financing to start or scale BOFs.
Purpose of the Study and Research Questions
Business ownership could provide a pathway to building personal and broad-based
wealth in Black communities. Research indicates small business owners have a median net worth
of 2.5 times that of non-business owners (Holguin et al., 2022). In 2017, U.S. small businesses
employed 57% of all workers in the country (Greenberg, 2017). However, according to Perry et
al. (2021), an equitable representation based on population share would require creating an
additional 806,000 Black-owned businesses. Poor access to capital impedes many Black

5
entrepreneurs from starting and scaling businesses (Holguin et al., 2022; Perry et al., 2021). This
study explores how credit unions can better address Black entrepreneurs’ banking needs as they
form and grow new businesses. Extensive research exists about flaws in government economic
and banking policy resulting in a broken banking system for historically marginalized
communities in the United States (Aladangady & Forde, 2021; Baradaran, 2017, 2018, 2021;
Cover et al., 2011; Eisenberg-Guyot et al., 2018). However, the roles credit unions can play by
addressing systemic economic inequities and supporting Black small business owners is a
promising area to extend existing research. This study seeks to identify banking and lending
services that Black entrepreneurs need and how credit unions might fulfill those needs by
exploring the following research question:
1. What best practices do successful Black business owners have to share with other
entrepreneurs about navigating the U.S. financial system while starting a small
business?
2. What affects credit unions’ ability to design and offer the banking and lending
services Black entrepreneurs need?
3. What should credit unions do to support Black entrepreneurs starting and scaling
employer businesses?
Importance of the Study
Addressing the inequities in the U.S. banking system creating roadblocks for Black
entrepreneurs is important because the growth of BOFs is a pathway to addressing the financial
imbalances affecting Black communities. Economic inequities result in a dependency on fringe
financial services like payday loans, check cashing, buy-now-pay-later, and high-cost payment
alternatives. These fringe financial services have higher than standard fees and rates, which

6
perpetuate adverse economic outcomes (Bullock et al., 2020; Cover et al., 2011; The PEW
Charitable Trust, 2022) and potentially affect the borrower’s physical health (Eisenberg-Guyot et
al., 2018). Financial exclusion at the extremes leads to poverty. Children growing up in poverty
perpetuates inequity, not to mention the adversity of growing up in high-poverty neighborhoods
with poor access to quality food, schools, and medical care (The Anne E. Casey Foundation,
2019).
Addressing the banking challenges limiting the success of Black-owned businesses is
important because business ownership can help address the racial wealth gap and positively
affect the overall economy. Research shows Black-owned companies create wealth-building
opportunities for Black entrepreneurs (Holguin et al., 2022), could improve unemployment in
Black communities (Perry et al., 2021; Perry & Romer, 2020), and ultimately increase the output
of the overall U.S. economy (Winston et al., 2021). Research shows Black women business
owners accumulate 10 times more net worth than Black women who are not business owners
(Holguin et al., 2022), demonstrating the potential for wealth-building crosses racial and gender
boundaries. The value creation potential of small businesses extends beyond owner wealth; there
is also a potential for job creation. Perry et al. (2021) suggested many Black-owned sole
proprietors would grow into small businesses with employees if they had access to capital.
Research shows Black-owned companies are more likely to hire Black employees than Whiteowned businesses (Perry & Romer, 2020). If Black-owned employer businesses could reach
representative parity and employ at least one employee each, it would create more than 800,000
new jobs in the Black community (Perry et al., 2021; Perry & Romer, 2020). Reducing the
inequities in the U.S. banking system that create roadblocks for Black entrepreneurs can help
close the wealth gap and positively impact the economy.

7
Overview of Theoretical Framework and Methodology
This study sought to understand how Black business owners navigated the banking
system to meet their financial needs as they started and scaled employer businesses. The research
used Bronfenbrenner’s (1977, 1979, 1993) ecological systems theory (EST) as a framework to
understand Black entrepreneurs’ financial journeys. EST suggests multiple systems affect
individual development, behavior, and outcomes, see Figure 1. The microsystem consists of
those close relationships that influence the individual. The mesosystem considers the interaction
of the relationships in the microsystem. The exosystem consists of entities or organizations that
indirectly influence the individual. The macrosystem is the systemic or cultural influences that
affect behavior across systems and the individual. Finally, the chronosystem considers how these
systems and the individual change over time. The study consisted of a literature review and a
qualitative investigation of best practices used by Black entrepreneurs as they navigated these
systems while growing their employer businesses.
The study also sought to identify ways credit unions, working with Black entrepreneurs,
might offer more accessible and robust banking and lending services needed to start and scale
BOFs. By understanding how Black entrepreneurs navigated these systems and leveraged
support structures, one can better identify the role credit unions can play in advancing the
creation and development of BOFs. In addition to the literature review, this paper explored the
research questions by conducting a qualitative sequential study using semi-structured interviews
of two populations: (a) Black entrepreneurs starting and scaling BOFs and (b) credit union
executives who define and deliver banking and lending services to small businesses.

8
Figure 1
Bronfenbrenner’s Ecological Model for Black Entrepreneurs
Note. Figure develops concepts adapted from “Toward an Experimental Ecology of Human
Development” by U Bronfenbrenner, 1977, American Psychologist, 32(7), (10.1037/0003-
066X.32.7.513). Copyright 1977. American Psychological Association.

9
First, the study explored the best practices used by Black entrepreneurs as they leveraged
and navigated the nested systems that affected the financial development of their BOFs.
Understanding that these entrepreneurs may have addressed their business’s financial needs
differently, the semi-structured interview sought to capture the lived experiences of these
entrepreneurs as they navigated the ecological model. The data collected from the entrepreneur
interviews created a framework of best practices and informed the needs that persist when
entrepreneurs start BOFs. This data helped shape the semi-structured interviews with credit
union executives. The intent was to identify ways credit unions can better serve Black
entrepreneurs as they start BOFs.
Organization of the Dissertation
The study consists of five chapters: (a) introduction, (b) literature review, (c)
methodology review, (d) study findings, and (e) discussion and recommendation. Chapter One,
the introduction, described the macro problem of practice, the purpose of the study, the context
for the study, why the study is important, and the theoretical framework for the study. Chapter
Two explores the current literature on systemic bias in the U.S. economic and banking systems.
Chapter Two also reviews literature about the role of entrepreneurship in wealth creation, how
community banking supports entrepreneurship, and the role of credit unions in addressing
inequities experienced by historically marginalized communities. Chapter Three is a detailed
review of the methodology used in the study and includes descriptions of data sources,
participant selection, data collection and analysis procedures, potential ethical concerns,
identified limitations, and the assessed credibility of the study. Because this is a qualitative
study, Chapter Three also considers the researcher’s positionality relative to the study’s
participants. Chapter Four details the study findings based on the analysis conducted on data

10
from the qualitative interviews of the two participant groups. Chapter Five discusses the findings
in relation to current literature and presents recommendations for practice based on the analysis
of the results and literature-supported remediations.

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Chapter Two: Literature Review
This chapter discusses literature related to inequities in the U.S. banking system creating
roadblocks for Black entrepreneurs seeking the financial services they need to start and grow
employer businesses. The review begins with a comprehensive look at the systemic racism
embedded in the U.S. financial system, from the country’s early history of slavery to the
inequities in the banking system in the 2020s. The literature review then explores how BOFs
provide a pathway to building personal and broad-based wealth in Black communities. The
review continues the exploration of BOFs by looking at the literature related to access to credit
and bank services, which is critical to Black entrepreneurs growing their businesses. The
literature review then focuses on credit unions and how they might address the needs of Black
entrepreneurs. The chapter concludes with a review of Bronfenbrenner’s (1977, 1979, 1993)
ecological model and how the relevant literature relates to nested systems that influence Black
entrepreneurs’ financial journey when starting and scaling BOFs.
Inequities in the U.S. Banking System Rooted in Systemic Racism
Black households continue to encounter roadblocks that prevent them from reaching
economic parity. The roadblocks persist despite efforts by lawmakers and regulators to address
inequities present in the U.S. banking and economic system. These inequities are evident when
one considers that more than 40% of Black households could not meet their banking needs with
mainstream financial services in 2021 compared to 13% of White households (FED, 2022). The
racial wealth gap, a broad measure of economic equity, is further evidence of the inequities faced
by Black families in the United States. The racial wealth gap widened between Black and White
households from 2013 to 2016 and held steady between 2016 and 2019 (Aladangady & Forde,

12
2021). To fully understand how these inequities could persist despite the efforts of lawmakers
and regulators, one needs to examine the history of systemic racism in the U.S. financial system.
Racism in the U.S. Financial System From the 1800s to 1964
The history of racism in the U.S. financial system is rooted in the country’s willingness to
justify slavery because it fueled the country’s economic engine early from 1790 to 1860. By the
early 1800s, structures were put in place to use enslaved people as collateral for loans, and by
1860 the economy built on slavery represented 18.9% of the total $16.2 billion of wealth
accumulated in the United States (Baptist, 2016). Paragraph 2 of the U.S. Declaration of
Independence (1776) states, “We hold these truths to be self-evident, that all men are created
equal, that they are endowed by their Creator with certain unalienable Rights, that among these
are Life, Liberty and the pursuit of Happiness.” Yet, slavery was an integral part of the economy.
Despite the ethical dilemma that slavery posed, the slavery-fueled economy of the South grew at
an unprecedented pace between 1825 and 1860 (Baptist, 2016). Baradaran (2017) noted that a
theory of racial hierarchy and the conflation of Christian doctrines became the justification used
by those in power to reconcile the founding principle of freedom with the treatment of enslaved
people as property. Baradaran put a fine point on it, saying, “Slavery’s unparalleled bounty is
what caused many Americans to tolerate such a barbarous institution” (p. 10). Slavery was
profitable, and racism allowed America to accept it.
The racism embedded in the economy was not just a Southern phenomenon. While
racism allowed slavery to thrive in the South (Baptist, 2016; Baradaran, 2017), racism in the
North allowed segregation and poor work conditions to magnify the financial struggles
experienced by free Black people in the North (Urofsky, 2022). Politicians in the North turned a
blind eye to racism and slavery because they knew the South would leave the Union if their

13
slavery-based economic engine became illegal (Urofsky, 2022). The country was willing to
accept slavery and embrace racism for financial gain (Baptist, 2016; Baradaran, 2017). The Civil
War, which started in April 1861 and did not conclude until 1865, disrupted slavery. However, it
would take more than a declaration of freedom to disrupt the systemic racism embedded in the
belief systems and financial structures of the United States.
Abraham Lincoln’s 1863 Emancipation Proclamation, nor the Union’s victory in April
1865 over the Confederacy, would not be enough to address the racism embedded in the culture
and the economic process. As W. E. B. Du Bois said in his seminal work Black Reconstruction
in America (1935), “The slave went free; stood a brief moment in the sun; then moved back
again toward slavery” (Du Bois, 2007, Chapter II, para. 56). The 13th and 14th Amendments to
the U.S. Constitution granted equal rights for Black men, but Black Codes in the Southern states
limited Black people’s right to vote, be employed, and own property (Fleischman et al., 2014).
The Freedmen’s Bureau, established just before the war ended, was an attempt by the
government to provide food, shelter, and manage employment contracts for those freed by the
Emancipation Proclamation and to refugees of the war (U.S. Senate: Freedmen’s Bureau Acts of
1865 and 1866, n.d.). However, the Freedmen’s Bureau fell short, with the government choosing
to reunite the Union versus attempting to elevate freedmen’s status economically or politically
(Fleischman et al., 2014). Just as politicians failed to challenge slavery to keep the South in the
Union before the Civil War (Urofsky, 2022), politicians would not close the economic gap for
those formerly enslaved to pacify the demands of the South to keep the newly reformed Union
together (Fleischman et al., 2014).
A direct effect of the Civil War and subsequent emancipation was a significant shift in
the wealth gap between White and Black households, which dropped from 56:1 in 1860 to 23:1

14
in 1870 (Derenoncourt et al., 2022). An initial conclusion from such a significant shift in a
critical measure of economic equity might be that the war mitigated racism that fueled slavery.
Unfortunately, a considerable portion of the change resulted from the wealth that disappeared
during and after the war. For example, the wealth held in the form of property by Southerners
dropped an estimated 75% between 1860 and 1870 (DuPont & Rosenbloom, 2016). The abrupt
shift in the wealth gap was more an outcome of the wealthy White families losing wealth than of
progress in ending racism in the social, political, or economic system.
After this initial shift in the wealth gap, progress slowed. The conditions were biased and
unequal, which made it difficult for Black families to prosper (Baradaran, 2017; Derenoncourt et
al., 2022; Lee, 2019). It took the next 50 years to accomplish what the war had done in less than
10 years, the wealth gap moved 56:1 to 23:1 in the period between 1860 to 1870 and then from
23:1 to 10:1 between 1870 and 1920 (Derenoncourt et al., 2022). Even though the wealth gap
closed from the end of the Civil War to the 1920s, racist policies persisted. It was a period of
exclusionary policies and unfair power distribution that allowed White leaders to take advantage
of Black families (Baradaran, 2017; Lee, 2019; Messer et al., 2018). The wealth gap closed, but
racism was not dead.
Economic inequity does not accurately describe the late 1910s to early 1920s. It was a
period of terrorism for Black families, which included events like the Tulsa race riots, where
White mobs caused more than $1.8 million in property damage, destroyed homes and businesses,
and killed as many as 300 Black Americans (Messer et al., 2018). Oppression, both economic
and physical, of successful Black Americans by fearful White citizens was common (Baradaran,
2017; Lee, 2019; Messer et al., 2018). The lasting effects of failed policies (Baradaran, 2021),
economic exclusion (Baradaran, 2017; Derenoncourt et al., 2022; Du Bois, 2007), and violence

15
(Lee, 2019; Messer et al., 2018) were plodding progress toward financial equity between 1920
and 1950 (Derenoncourt et al., 2022). According to research conducted by Derenoncourt et al.
(2022), the racial wealth gap only improved from 10:1 in 1920 to 7:1 by 1950. While the civil
rights movement was getting underway, systemic racism still affected the U.S. financial system.
Slow Progress Since the Civil Rights Movement
Even after the civil rights movement, progress closing the racial wealth gap remained
slow. The systemic racism embedded in the nation’s social fabric and financial system is longlasting. Over the 70 years between 1950 and 2020, the wealth gap between White and Black
Americans has hovered between 5:1 and 7:1, expanding over the last few decades (Derenoncourt
et al., 2022). Evidence shows that 150 years after the abolition of slavery and 70 years after the
start of the civil rights movement, Black households still suffer inequities across critical
economic measures (Aladangady & Forde, 2021; FED, 2022; Federal Deposit Insurance
Corporation, 2020).
Even laws criminalizing racial discrimination in areas like pay practices ( Civil Rights
Act, 1964), access to housing (Fair Housing Act, 1968), lending (Equal Credit Opportunity Act,
1974), and fair and transparent delivery of financial services (Dodd-Frank, 2010) failed to
address inequities. According to a 2021 Federal Reserve Analyst Note, the average White
household still earns twice as much and holds over 6 times more accumulated net wealth than the
average Black household (Aladangady & Forde, 2021). Inequities are also evident in the banking
system according to a 2019 FDIC survey released in 2020. Black households in the United States
were far more likely than White or Asian families to be unbanked, meaning they had no access to
mainstream banking services, according to the (FDIC, 2020). The disparity in unbanked rates
between Black and White households did not improve significantly between 2019 and 2021

16
(FED, 2022). In 2021, the unbanked rate for Black households was 13%, still well above White
and Asian households, which hovered around 3% and 2%, respectively (FED, 2022).
The lack of access to credit and banking services, along with inequities in pay and the
wealth gap, perpetuates adverse outcomes for Black households in 2021. The lack of access to
credit causes Black households to turn toward fringe financial services, which often charge
annual percentage rates (APR) ranging from 125% to over 600% for small loans (The PEW
Charitable Trust, 2022). These exorbitant rates are predatory and perpetuate a cycle of
dependency on fringe services. The disparity in earnings and savings also increases the
likelihood of economic stress for Black households. According to the 2021 FED report on U.S.
economic well-being, 27% of Black households earning between $50,000 and $99,000 per year
would struggle to pay current monthly bills if they experienced a $400 emergency expense
because of inadequate access to savings or credit (FED, 2022). The same report showed that only
14% of White and 7% of Asian households in the $50,000 to $99,000 earning range would face
the same struggle, underscoring the inequities experienced by Black households.
Systemic racism continues to create roadblocks in the financial and banking systems that
impede Black households from reaching economic parity. The racial wealth gap (Derenoncourt
et al., 2022) and the disproportionately high unbanked rate among Black households (FED, 2021;
FDIC, 2020) are evidence that the government interventions designed to remove racial bias from
the banking industry (Dodd-Frank, 2010; Equal Credit Opportunity Act, 1974; Fair Housing Act,
1968) are not working. Baradaran (2021) suggested that studies predicting it would take 228
more years for the wealth gap to close at its current pace are optimistic without more robust
intervention. Baradaran (2017) suggested that the systemic racism engrained through slavery,
Jim Crow laws, violence, and redlining reinforces the cycle of poverty and a widening wealth

17
gap. Feagin (2004, p. 219) was equally pessimistic, saying, “We have remodeled this racist
house two times, during the abolitionist and Civil War periods and again during the civil rights
revolution of the 1950s and 1960s, yet the household’s racist foundation today is still
substantially in place.” The Civil War, the civil rights movement, and numerous laws designed to
address racial bias in the financial system failed to remove the roadblocks faced by Black
households.
Closing the Wealth Gap: Black-Owned Employer Firms as a Pathway
The racial wealth gap is a complicated problem that passes to subsequent generations.
Aladangady and Forde’s (2021) FED note outlines a mosaic of issues contributing to the racial
wealth gap, including income, savings rates, debt, home equity, and initial wealth. One is more
likely to generate wealth if one starts with some financial privilege, according to Williams
(2017). Williams, who introduced the wealth privilege model in his research on economic
stratification, suggested that inherited wealth and asset ownership are two dominant factors that
contribute to wealth accumulation, and they might better explain why the racial wealth gap is
wider than the income gap.
The types of assets families hold and pass to the next generation also influence wealth
creation. An ordinary least squares regression, which provides a means of predicting the
relationship between independent and dependent variables, of the 2013 Survey of Consumer
Finances of 5,727 households showed that real estate holdings, stocks, retirement funds, and
ownership of private businesses strongly link to increased net worth (Williams, 2017). Williams’
analysis suggested these factors were more likely to predict higher net worth than earnings,
investment risk appetite, age, or saving behavior. Aladangady and Forde’s (2021) FED note had
similar findings. As net wealth increases, the typical portfolio shifts toward home equity, and at

18
the top of the wealth pyramid, holdings shift toward stocks, bonds, and business ownership.
Nearly 40% of the families in the top 10% of all U.S. income earners were business owners,
according to the Survey of Consumer Finances in 2013, 2016, and 2019 (Bhutta et al., 2020).
Evidence suggests that even though the racial wealth gap is a multifaceted problem (Aladangady
& Forde, 2021), business ownership is a predictable precursor to wealth creation (Aladangady &
Forde, 2021; Bhutta et al., 2020; Williams, 2017).
Business Ownership as a Precursor to Wealth Creation
Business ownership is a precursor to wealth creation because it generates higher incomes
for business owners, creates jobs for individuals in the community, and is inheritable. A Federal
Reserve Bank report prepared by Bhutta et al. (2020) showed that in 2019 owners of small
employer firms, those with five or fewer employees, had an average income of $166,700 per year
versus an average income of $82,000 for non-business-owners. For those business owners whose
firms employ more than five people, the average income increases to $498,900 (Bhutta et al.,
2020), demonstrating the wealth-building potential of business ownership. Small businesses are
also primary employers in the economy, with more than half of the private-sector jobs coming
from small businesses in 2016 (Greig et al., 2018). In the United States, business-owning
families have an average net worth that is three to 10 times more than families who do not own
businesses (Bhutta et al., 2020). Evidence supports the conclusion that business ownership
results in increased earnings and wealth-building for the owner’s family and that small
businesses fuel the economy by generating private-sector jobs.
Creating and scaling BOFs could positively impact wealth building for Black households
and create jobs in the Black community. In a longitudinal Panel Study of Income Dynamics data
on family wealth between 1999 and 2009, Bradford (2014) found that Black entrepreneurship

19
was a pathway to reducing the racial wealth gap. The significant finding was that Black business
owners and White business owners experienced equivalent increases in wealth over their nonbusiness-owning counterparts (Bradford). In a study building on Bradford’s work, Kroeger and
Wright (2021) added two additional cohorts running from 2009 to 2017. Kroeger and Wright’s
findings supported Bradford’s conclusions, with successful Black entrepreneurs experiencing
even more promising upward wealth mobility than successful White entrepreneurs. These two
studies are encouraging concerning the potential to close the racial wealth gap by starting and
scaling BOFs. However, Kroeger and Wright’s analysis presented a cautionary element. Their
analysis showed that Black entrepreneurs have a higher failure rate than White entrepreneurs due
to racial bias associated with securing capital and financing. The higher failure rate is not the
only issue. Black entrepreneurs whose businesses do not succeed are twice as likely to fall to the
bottom wealth tercile than unsuccessful White entrepreneurs (Kroeger & Wright). Realizing the
wealth-building potential of increasing the number of BOFs in the United States means starting
new BOFs and helping current Black entrepreneurs succeed.
Black-Owned Employer Firms: Underrepresented
Despite the potential economic benefits for business owners and the economy
(Aladangady & Forde, 2021; Bhutta et al., 2020; Greig et al., 2018; Williams, 2017), BOFs are
significantly underrepresented. In 2021, only 2% of U.S. employer businesses were Black-owned
(Wiersch et al., 2022), even though Black Americans represented 13.6% of the total population
(U.S. Census Bureau, 2022). Further underscoring the inequitable representation, White-owned
businesses made up 83% of all the employer firms in the country in 2021 (Wiersch et al.). Not
only is the underrepresentation significant, but the growth rate is also a concern. The percentage
of BOFs in the United States grew by only 20 basis points between 2002 and 2021 (Fairlie &

20
Robb, 2010). Addressing the slow growth rate of Black-owned businesses and bringing the
number of BOFs into parity with the population has the potential to close the racial wealth gap.
The U.S. Small Business Administration (2021) data indicated there were 6,055,421
small businesses in the United States in 2021. Increasing Black-owned business representation
from 2% to 13%, in parity with the population, would require 702,429 new businesses owned by
Black entrepreneurs. If these new businesses employed only two people each, it would result in
more than 1.4 million jobs added to the U.S. economy. The potential wealth creation for Black
business owners is significant also. To understand the positive impact of bringing BOFs into
parity with the population, consider that successful business owners who employ fewer than five
employees make, on average, $43 thousand per year in income and conservatively accumulate
$219 thousand more in wealth than non-business owners (Bhutta et al., 2020). The addition of
seven hundred thousand new Black-owned businesses could mean the addition of more than $30
billion in incremental income per year and $153 billion in additional wealth creation for Black
families in the United States. While these are promising projections, Kroeger and Wright (2021)
stated that starting new businesses have an element of risk that could exacerbate the racial wealth
gap if new BOFs are created and subsequently fail.
The potential to increase Black family income and wealth accumulation by bringing
BOFs into parity (Aladangady & Forde, 2021; Bhutta et al., 2020; Bradford, 2014; Kroeger &
Wright, 2021; Williams, 2017) could help close the racial wealth gap. However, creating new
BOFs that subsequently fail would have the opposite effect (Kroeger & Wright). Addressing the
roadblocks facing Black entrepreneurs starting, growing, and sustaining employer firms is
critical if the number of BOFs in the U.S. economy is to reach parity with population
demographics.

21
Black-Owned Employer Firms: Banking System Inequities
Much of the literature and industry reports point to inequitable access to credit as one of
the primary roadblocks facing Black entrepreneurs in the United States (Baboolall & Fitzhugh,
2021; Bates et al., 2022; Fairlie et al., 2022; Fairlie & Robb, 2010; Kroeger & Wright, 2021;
Mitchell & Pearce, 2011). Inequities in the U.S. banking system create roadblocks for Black
entrepreneurs seeking the financial services they need to start and grow employer businesses.
Kroeger and Wright (2021) noted that banking system inequities, specifically inadequate access
to credit, facing Black entrepreneurs cause the rate of failure for Black-owned businesses to be
much higher than for White-owned businesses. Baboolall and Fitzhugh (2021) also called out
access to credit as a significant roadblock for Black entrepreneurs, describing the experience of
one business owner who contacted 35–40 financial services firms before finally securing a loan
with a Black-owned community development FI.
The inequities in the banking system creating roadblocks for Black entrepreneurs are
evident in the data tracked by the U.S. government and financial services industry. A 2022 FED
report indicated that only 16% of BOFs received 100% of the bank financing they sought in
2021, while 35% of White-owned employer firms (WOF) could fulfill 100% of their requested
financing needs (Wiersch & Misera, 2022). Further evidence of the problem is seen in the 2022
U.S. Census Bureau Small Business Credit Survey, which showed that 20.7% of BOFs received
0% of the credit they sought in 2020, while zero funding affected only 10.1% of WOFs (U.S.
Census Bureau, 2022). Access to credit is only part of the problem. The treatment of BOFs after
receiving funding is also problematic. The rate of repayment forgiveness of federal aid also
shows the inequities experienced by BOFs. In 2021, WOFs were twice as likely as BOFs to
receive 100% repayment forgiveness (U.S. Census Bureau, 2022). These outcomes point to the

22
bias inherent in the financial system, which results in unequal access to credit for Black
entrepreneurs, but solving the problem is complex.
While much of the literature agrees that access to credit is a significant roadblock facing
Black entrepreneurs as they seek to start and grow businesses, solving the problem is complex.
Baboolall and Fitzhugh’s (2021) article, which focused on the compounding factors created by
COVID-19 on access to credit for Black businesses, suggested that financial services firms need
to go beyond addressing the historical systemic inequities that impede access to credit for Black
entrepreneurs. Baboolall and Fitzhugh pointed to the need for financial services firms to provide
alternative methods of applying for loans, improve communications techniques, sponsor
financial and entrepreneurial education, and create networking opportunities. Bates et al. (2022)
suggested the most significant barrier is “the limited number of entrepreneurs possessing the
expertise required to utilize financing effectively to build viable firms” (p. 51). Bates et al.
utilized a drain-of-human-resources framework to test the role of entrepreneurial expertise in
employer firm success. The authors found that increasing entrepreneurial expertise contributed to
the success rate of Black-owned businesses. The literature suggests improving access to credit,
communications between Black entrepreneurs and FIs, education about navigating the banking
system, and relationships with financial services firms are critical elements in addressing the
inequities in the U.S. banking system. These elements, in combination, suggest that establishing
a close relationship between Black entrepreneurs and their banking partner is a pathway to
success for starting, growing, and sustaining Black-owned employer firms.
Credit Unions
Credit unions are membership cooperatives that form close relationships with their
individuals, business members, and the community (NCUA, 2022c). Credit unions’ early success

23
came from their distinct information advantage over larger FIs because they had a close
relationship with their members and the local community (McKillop & Wilson, 2011). Today,
according to the NCUA, credit unions operate on the principle that they serve the members’
interests versus banks that operate in the interest of profits and shareholders
(MyCreditUnion.gov, n.d.). The ability to serve members’ interests necessitates a deeper
understanding of what the members want. This principle of service applies to small businesses
that are members of credit unions. The National Association of Federally-Insured Credit Unions
(NAFCU) reported that during the financial crisis of 2007, credit unions filled the gap created by
banks as they pulled back from lending to small businesses (NAFCU, 2022). The same report
noted that since 2007, credit union lending to small businesses had grown 261%, while small
business lending by banks has grown only 3%. The willingness of credit unions to step in to fill a
void left by banks demonstrates the commitment credit unions have to the community and their
members. Credit unions’ focus on their members, building close relationships, and a
commitment to community positions them as potential partners for Black entrepreneurs as they
navigate inequities in the U.S. banking system.
History and Growth of Credit Unions
In 1964, Raiffeisen opened a rural cooperative lending institution (McKillop & Wilson,
2011; MyCreditUnion.gov, n.d.) that put a premium on serving a community that had difficulty
banking and securing loans from mainstream banks (McKillop & Wilson, 2011). The early focus
on underserved communities is a foundational cornerstone of credit unions that set the tone for
the future. The credit union movement came to North America in the early 1900s when Alphonse
Desjardins brought the concept of cooperative FIs to Canada (McKillop & Wilson, 2011;
MyCreditUnion.gov, n.d.; NCUA, 2022a; Richard, 2015). In 1909, Desjardins established the

24
first U.S. credit union in New Hampshire, and Edward Filene joined forces with the
Massachusetts Bank Commissioner, Pierre Jay, to create the first statute that enabled the
establishment of credit unions (MyCreditUnion.gov, n.d.; NCUA, 2022a; Richard, 2015). From
here, credit unions grew across the United States, focusing on providing banking and lending
services to underserved communities.
In the years that followed the early establishment of credit unions in New Hampshire and
Massachusetts, some credit unions strayed from Desjardins’ vision and existed to benefit a select
few on the back of members’ deposits (Richard, 2015). With support from Desjardins, Arthur
Ham drafted credit union legislation for New York that, when enacted in May 1913, defined
credit unions as a corporation that promoted savings by their members and, in return, would offer
loans to members (Richard, 2015). In 1934, President Franklin Delano Roosevelt created the
Federal Credit Union Division within the Farm Credit Administration (NCUA, 2022a). By tying
credit union oversight to the Farm Credit Administration’s mission of addressing the financial
problems in rural America (NCUA, 2022a), President Roosevelt cemented the role of credit
unions as a community banking service focused on encouraging thrift and providing loans to
underserved populations. In 1970, the United States established the NUCA to ensure better
oversight of credit union operations and the National Credit Union Share Insurance Fund
(NCUSIF) to insure member deposits (MyCreditUnion.gov, n.d.). The new organizations made
credit unions accessible and safer for members, which resulted in the tripling of credit union
assets between 1970 and 1979 (MyCreditUnion.gov, n.d.). Since 1979, credit unions have grown
and, under the NCUA’s regulatory guidance, continue to encourage saving and financial
responsibility in the communities that credit unions serve (MyCreditUnion.gov, n.d.).

25
Black-Owned Employer Firms: The Role of Credit Unions
Credit unions can help Black entrepreneurs navigate roadblocks created by inequities in
the U.S. banking system. The principles under which credit unions operate align with the need to
improve access to credit (Baboolall & Fitzhugh, 2021; Bates et al., 2022; Fairlie et al., 2022;
Fairlie & Robb, 2010; Kroeger & Wright, 2021; Mitchell & Pearce, 2011), enhance
communications, deepen relationships (Baboolall & Fitzhugh, 2021), and provide financial and
entrepreneurial education (Baboolall & Fitzhugh, 2021; Bates et al., 2022). Even though credit
unions are not banks, they can meet the financial services needed by BOFs. Table 1 highlights
the primary differences between banks and credit unions. Two key differences, credit unions’
not-for-profit status and their philanthropic focus (MyCreditUnion.gov, n.d.), are relevant to
addressing the banking needs of Black entrepreneurs. These two attributes of credit unions mean
they can align their services to reduce fees and offer services to serve the community. If properly
aligned, credit unions could provide greater access to credit, strengthen relationships through
community involvement, and provide needed education for Black entrepreneurs.
The ability of credit unions to lean into challenges is evident from their ability to backfill
small business lending not provided by banks during and following the 2007 financial crisis
(NAFCU, 2022). However, some limitations faced by credit unions might account for why this
substantial growth of small business lending between 2007 and 2022 (NAFCU, 2022) did not
translate into improved outcomes for BOFs seeking credit. One issue is that credit union business
lending cannot exceed 1.75 times the credit union’s total net assets (Aggregate MBL Limit,
2019). This limitation, combined with the unique attributes of credit unions, hampers smaller
credit unions from extending large sums of credit to businesses and would significantly limit the
credit union’s ability to extend business loans with higher risk profiles. The 1.75 times total net

26
assets business lending limits explain the inability to extend large sums of credit to businesses,
but the limited ability to extend credit to higher risk profiles is more nuanced. Table 1 points out
two significant differences between banks and credit unions that explain the risk limitations:
ownership and profits (MyCreditUnion.gov, n.d.). First, members own the credit union through
member deposits. These deposits make up the full ownership of the credit union. The credit
union cannot raise capital except through increased member deposits, so the only mechanism to
lend more than the credit union’s total assets is through retained earnings. Second, credit unions
are not-for-profit, limiting retained earnings. The result of credit unions’ limited risk profile and
limited assets for lending is that most credit union business lending is for commercial real estate
(Ritter, 2020), which tends to be less risky because they are secured loans.
Table 1
Difference Between Banks and Credit Unions
Attribute Banks Credit unions
Ownership Publicly traded or privately owned. Owned by the members (customers)
Customers Anyone meeting credit requirements
for deposits or loans.
Restricted to a field of membership
(shares = member deposits)
Voting One share of stock equals one vote One member, one vote
Philanthropy Optional adoption of philanthropic
outreach
Credit unions operate to promote the
financial health of members.
Profits For-profit enterprise with returns
benefiting the shareholders
Not-for-profit enterprise with profits
returned to the members
Note. Table created utilizing data from What is a Credit Union by MyCreditUnion.gov, n.d.
(https://mycreditunion.gov/about-credit-unions/credit-union-different-than-a-bank). In the public
domain.

27
Some differences between credit unions and banks provide a pathway to deeper
engagement with BOFs. However, credit unions need to be creative to overcome the limitations
that impede their ability to offer a more robust suite of services and lending to Black
entrepreneurs. This study explores the unmet needs of BOFs and what changes credit unions
might make to fulfill these needs, irrespective of the current challenges.
Conceptual Framework
The study uses Bronfenbrenner’s (1977, 1979, 1993) EST as a scaffolding to understand
Black entrepreneurs’ financial journeys as they navigate the inequities in the U.S. banking
system. EST suggests that at any moment in time, four nested systems—microsystem,
mesosystem, exosystem, macrosystem—affect an individual’s development and that these
systems, and the individual, change over time in a fifth system described as the chronosystem.
Figure 2 captures the nested layers of influence and the interaction between the various systems
that affect individual development over time.
There are more people, institutions, entities, and systems of power that impact Black
entrepreneur development than is practical to cover in a single study. Figure 2 captures the
critical participants in each system that affect Black entrepreneurs as they start and grow
employer businesses. The microsystem shows the relationships closest to Black entrepreneurs as
they try to start and grow their businesses. The macrosystem consists of the regulators,
lawmakers, and systemic societal bias creating inequities in the U.S. banking system. These
elements of the macrosystem negatively impact outcomes experienced by entrepreneurs starting
and building BOFs. The exosystem focuses on the financial services industry, where the
inequities of the macrosystem manifest. Credit unions, shown in the exosystem, are the center of

28
focus for this study because they could potentially help Black entrepreneurs overcome the
roadblocks created by the systems of power in the macro system.
Figure 2
A Bronfenbrenner’s EST View of Influences on Black Entrepreneurs
Note. Key entities in a Black entrepreneur’s ecological system. Figure leverages concepts
adapted from “Toward an Experimental Ecology of Human Development” by U Bronfenbrenner,
1977, American Psychologist, 32(7), (10.1037/0003-066X.32.7.513). Copyright 1977. American
Psychological Association.
Macrosystem
Legal System – Systemic Racism – Regulators
Exosystem
Banks – Credit Unions – Financial Institutions
Mesosystem
Individual Credit &
Financial Condition Influences Interactions
Microsystem
Community – Customers
Mentors – Family
Black
Businesses
Owners
Chronosystem
Systems of Influence Change Over Time

29
EST’s (Bronfenbrenner, 1977, 1979, 1993) concept of nested systems puts the individual,
or in the case of this study, Black entrepreneurs, at the center of the model. Though all systems
interact with each other in the EST model, EST implies that the microsystem is more directly
impactful than the macrosystem. However, this study considers how Black entrepreneurs
navigate the roadblocks created by inequities in the outer layer of the ecological system. Black
entrepreneurs are not at the center of the ecological system, but they are traversing it as they seek
to start and grow their businesses. Neal and Neal (2013) introduced an alternative view of EST
based on a networked relationship between the different systems, which aligns better with the
experience of Black entrepreneurs starting and growing employer businesses. Neal and Neal
suggested that the various participants or systems of power at each layer of the nested system
interact across systems more like a social network. Applying Neal and Neal’s model to this
study, see Figure 3, one would find the center of the system is the business itself, with the
entrepreneur traversing the various systems as they start and build their business.
The model, Figure 3, shows how Black entrepreneurs’ experience and interact with other
people, businesses, and systems of power as they traverse the macro-, exo-, and micro-systems.
The exosystem in Figure 3 represents the interaction between the participants in the various
systems that ultimately results in the financial success or struggles of the business. This
qualitative study uses a best practices approach to interviewing Black entrepreneurs. The study
explored how the participants successfully navigated the roadblocks created by inequities in the
U.S. banking system at the macrosystem. The study will also include qualitative interviews of
executives at credit unions to determine how they might fill gaps in financial services offered to
entrepreneurs starting and growing BOFs. The goal is to determine how Black entrepreneurs and
credit unions can work together to mitigate banking system inequities.

30
Figure 3
Black Entrepreneurs’ Journey to Start and Grow Employer Businesses
Note. The figure depicts the nested systems of influence on a Black entrepreneur’s businessbuilding journey. The figure develops concepts adapted from “Nested or networked? Future
directions for ecological systems theory.” by J. W. Neal and Z. P. Neal, 2013, Social
Development, 22(4), (https://www.doi.org/10.1111/sode.12018). Copyright 2013. Neal and Neal.
Adapted with permission. CC BY-NC-SA.
Black-Owned Employer Firm Black-Owned Employer Firm Black-Owned Employer Firm Black-Owned Employer
FirmBlack Business Owner’s Ecological System Experience
Black-Owned
Employer
Firm
Mentors,
Customers,
Community
Financial
Condition
Credit
Unions
Banking
System
Inequities

31
Summary
This chapter discussed literature related to the inequities in the U.S. banking system
creating roadblocks for Black entrepreneurs seeking the financial services they need to start and
grow employer businesses. The literature review began with an analysis of the systemic racism
embedded in the U.S. financial system (Baradaran, 2017; Derenoncourt et al., 2022). The
literature shows that this systemic racism manifests as inequities in the banking system that
perpetuate adverse outcomes for Black entrepreneurs (Baboolall & Fitzhugh, 2021; Bates et al.,
2022; Fairlie et al., 2022; Fairlie & Robb, 2010; Kroeger & Wright, 2021; Mitchell & Pearce,
2011). Systemic racism and banking systems inequities are roadblocks to Black entrepreneurs
and appear in the macrosystem of Bronfenbrenner’s (1977, 1979, 1993) ecological system
theory. The literature review also explored the importance of entrepreneurship in closing the
racial wealth gap (Bradford, 2014; Kroeger & Wright, 2021) resulting from systemic racism and
inequities in the U.S. financial system (Aladangady & Forde, 2021). The chapter continued with
a detailed look at the roadblocks that Black entrepreneurs face and the negative outcomes they
cause. The literature review then focused on credit unions, their history, and how they might help
mitigate the roadblocks facing Black entrepreneurs and address the needs of BOFs. The chapter
concluded with a review of Bronfenbrenner’s ecological systems theory and an application of
Neal and Neal’s (2013) networked ecological system theory to this study.

32
Chapter Three: Methodology
The inequities in the U.S. banking system that contribute to the racial wealth gap also
create roadblocks for Black entrepreneurs as they seek banking services needed to start and grow
employer businesses. The inequities faced by Black families are rooted in systemic racism that
underpinned the slave economy that existed in the United States before the Civil War
(Baradaran, 2017; Derenoncourt et al., 2022). These inequities result in a wealth gap between
Black and White households (Aladangady & Forde, 2021) and manifest in unfair credit and
banking outcomes for Black entrepreneurs (Fairlie et al., 2022; U.S. Census Bureau, 2022). This
study explores best practices used by Black entrepreneurs as they navigate the roadblocks
created by inequities in the U.S. banking system and how credit unions might help mitigate the
inequities by addressing gaps in financial services needed by entrepreneurs as they start and
grow BOFs.
This chapter starts by explaining the research methodology, research questions, and data
sources. Next, the chapter discusses the study’s participants, consisting of two separate panels.
The chapter continues with a review of the data collection and instrumentation, followed by an
outline of data analysis. The next sections of the chapter discuss the credibility and
trustworthiness of the study and a review of my positionality with respect to the panel
participants. The chapter concludes with a review of ethical considerations and the limitations
and delimitations of the paper.
Methodology, Research Questions, and Data Sources
When selecting a research methodology, Creswell and Creswell (2018) suggest a
framework that examines philosophical worldviews, designs, and research methods. Specifically,
the authors suggest that this framework starts with the philosophical worldview brought to the

33
study by the researcher. Then the researcher can narrow the design and research method based on
the best fit for the worldview. This study explores best practices employed by Black
entrepreneurs navigating the inequities in the U.S. banking system and how credit unions might
engage with Black entrepreneurs to help mitigate these inequities. While this study could fit into
several of the worldviews described by Creswell and Creswell, I chose to approach the problem
of practice with a transformative worldview. This study documents the best practices Black
entrepreneurs use to navigate systems of power. The study explores how credit unions and other
financial services companies are part of these systems of power and how they might collaborate
with Black entrepreneurs to break down barriers facing others in the Black community starting
and scaling businesses. Figure 4 shows how the problem of practice, literature review, theoretical
framework, and application of a transformative worldview come together to frame the study. I
considered how these elements informed one another to develop the following research
questions:
1. What best practices do successful Black business owners have to share with other
entrepreneurs about navigating the U.S. financial system while starting a small
business?
2. What affects credit unions’ ability to design and offer the banking and lending
services Black entrepreneurs need?
3. What should credit unions do to support Black entrepreneurs starting and scaling
employer businesses?

Figure 4
Methodology, Research Questions, Data Collection, and Instrumentation
Note. Figure adapted from concepts appearing in Research Design (5th ed.), by J. W. Creswell and J. D. Creswell, 2018, SAGE
Publications Inc. Copyright 2013. SAGE Publications, Inc. and Qualitative Research (4th ed.), by S. B. Merriam and E. J. Tisdell,
2016, John Wiley & Sons, Inc. Copyright 2016. John Wiley & Sons, Inc.
34

35
The study explored these research questions through semi-structured interviews of two
populations: (a) Black entrepreneurs starting and scaling BOFs and (b) credit union executives
who define and deliver banking and lending services to small businesses. The interview of these
distinct populations started with semi-structured interviews of five Black entrepreneurs (Panel 1).
The interviews focused on best practices used by the participants as they leveraged relationships
and navigated the environment that affected the financial development of their businesses. The
entrepreneurs in Panel 1 addressed their businesses’ financial needs differently, so the semistructured interview provided a rough scaffolding to capture the lived experiences of these
entrepreneurs as they navigated the networked EST model presented in Chapter two, Figure 3.
The data collected from the entrepreneur interviews created the framework of best practices and
informed the needs that persist when entrepreneurs start BOFs.
Panel 2 consisted of nine credit union executives who run business banking operations,
digital products, business lending, or community engagement at their credit union. The semistructured interviews of Panel 2 focused on issues that credit union executives see as
impediments to their ability to address the needs identified in the Panel 1 interviews. The
interviews with Panel 2 also provided an opportunity to discuss the challenges Black
entrepreneurs face navigating the banking system, their practices to overcome these challenges,
and how Black entrepreneurs and credit unions could best work together. The interviews of
Panel 2 participants were semi-structured, leveraging questions developed in conjunction with
the learnings from Panel 1 interviews. The questions guided the conversations versus dominating
the interview. The result was a robust discussion with these executives about ways credit unions
can strengthen their relationships with BOFs. The session also explored opportunities to close the
gaps identified by Panel 1.

36
The data to answer the research questions came from the semi-structured interviews with
Panel 1 and 2 participants. As seen in Table 2, Panel 1 interviews focus on answering RQ1 and
RQ3, while Panel 2 data related to RQ2 and RQ3. To create a more robust discussion with Panel
2, the interviews and initial analysis of the transcripts from Panel 1 participants’ interviews
preceded the final development of the semi-structured interview protocol for Panel 2. Study
findings came from the detailed analysis and coding of the transcripts from both data sets.
Table 2
Data Sources
Research questions Panel 1 Panel 2
RQ1 X
RQ2 X
RQ3 X X

37
Participants
The study engaged two distinct participant groups separated into two panels. Panel 1
consisted of Black entrepreneurs who started and successfully sustained an employer business.
The population for Panel 1 was relatively large, with approximately 122,000 potential
participants (U.S. Small Business Administration, 2021; Wiersch et al., 2022). Creswell and
Creswell (2018) suggest that identifying the population, determining a method of selection,
sampling, and determining sample size are all critical elements of a well-defined study. In the
authors’ discussion of purposeful sampling, Merriam and Tisdell (2016) introduced the concept
of a unique sample. The authors noted that a unique sample is one where a specific or atypical
set of attributes define the group you are interested in studying. Unique sampling allows the
study to engage individuals with the knowledge and experiences to contribute to the findings. A
unique, purposeful sample fits the selection of Panel 1 participants because the study sought to
identify best practices for navigating the banking system in the United States. Panel 1 consisted
of Black entrepreneurs who had started and experienced success sustaining an employer
business. The source of the panel was a combination of Black entrepreneurs referred to me
through my network and entrepreneurs introduced by another panelist. Panel 1 consisted of
individuals from multiple regions across the United States. The panel also spanned multiple
industries. While the diverse geography and industry represented by the participants provided a
broad perspective, there was convergence around common practices and views about how credit
unions could better engage BOFs. Chapter Four discusses these findings.
Nine credit union executives made up Panel 2. As of 2022, there were 4,903 federally
insured credit unions in the United States (NCUA, 2022b), and each credit union would have two
or three executives who would have qualified as participants. I used field of memberships, which

38
determines the unique populations that credit unions can serve, to narrow the pool to more
relevant credit unions. A unique, purposeful sample of credit union executives, such that the
participants would have the ability to provide pertinent information related to the study, made up
Panel 2. I used my position as an executive at one of the nation’s largest credit unions to
selectively engage executives in the credit unions that had significant engagement with the Black
business community.
Data Collection and Instrumentation
The racial wealth gap is a complicated problem that stems from inequities in income,
savings rates, debt, home equity, and initial wealth (Aladangady & Forde, 2021). Decomposing
each of these inequities in a single study would be difficult. Figure 5 shows how I started with a
wide view of the underlying causes of the racial wealth gap in the United States and began to
narrow the focus. Research shows that business ownership can help close many of these
inequities and is a predictable precursor to wealth creation (Aladangady & Forde, 2021; Bhutta
et al., 2020; Williams, 2017). This study focused on best practices that Black entrepreneurs used
to start and grow BOFs and their continuing banking needs. The research also explored how
credit unions could best collaborate with Black entrepreneurs to support their journey.

Figure 5
Data Collection and Analysis Process
Note. Figure depicts the data collection and analysis process used in this study, developed from concepts appearing in Qualitative
Research (4th ed.), by S. B. Merriam and E. J. Tisdell, 2016, John Wiley & Sons, Inc. Copyright 2016. John Wiley & Sons, Inc.
39
3
9

40
Studying statistics on BOFs in the United States and examining the policies guiding
credit union behavior might provide some insight into the research questions posed in this study.
However, the underlying data to understand how Black entrepreneurs navigate the systems of
inequity and how credit unions propose to support BOFs better does not exist in balance sheets,
the news, or statistics. These data exist in the form of knowledge learned by Black entrepreneurs
as they navigated the systems of inequity to scale their businesses and in understanding the
challenges credit union executives have faced as they try to support the development of BOFs.
This study focuses on the lived experiences of these two groups. This study extracts, compiles,
and analyzes the data found in this knowledge and understanding.
Extracting knowledge and understanding through observation, interviews, and document
analysis is the essence of qualitative research (Merriam & Tisdell, 2016). Specific to interviews,
Weiss (1995) concluded they are the only way to learn about the lived experiences of others. For
this study, I collected data from the lived experiences of Black entrepreneurs and credit union
executives. Leaning heavily on interviews as the source of data collection, the study was able to
document best practices, knowledge, and recommendations from these two panels. The data
came from a qualitative sequential study design using semi-structured interviews developed from
the posed research questions. Figure 5 shows how the research questions informed the
development of interview protocols for two different populations and how I iterated between
interviewing participants from the two panels and analyzing transcripts from the interviews. The
two panels each had their own semi-structured interview protocols.
Panel 1
Panel 1 consisted of five Black entrepreneurs who had successfully started and grown a
small business. The protocol for Panel 1 (see Appendix A) was a semi-structured interview

41
consisting of four foundational demographic questions and 10 open-ended questions designed to
explore the lived experiences of Black entrepreneurs who own and operate employer businesses.
The interview questions explored best practices used by the participants as they started and
scaled their employer businesses, navigated the U.S. banking system, and overcame roadblocks.
Using semi-structured questions allowed me the flexibility to pursue interesting data further than
a fully structured interview would allow (Merriam & Tisdell, 2016). The study exploited this
flexibility by using pre-planned follow-up questions, as needed, to tease out more robust data
that did not surface without further probing. The Panel 1 interviews were more conversational
than expected, and the questions largely provided a framework for the conversation. The
participants shared experiences and insights that went beyond the original expectation of the
researcher when originally drafting the questions.
The interviews with Panel 1 participants took between 50 and 60 minutes, depending on
the depth the participant went with each question. The researcher held the interviewers on Zoom.
Interview schedules accommodated the business owners’ needs. After gaining participant
agreement, the researcher recorded and transcribed the interviews using Zoom’s built-in
capability.
Panel 2
Panel 2 consisted of nine credit union executives who had experience in business banking
and working with Black business owners. The protocol for Panel 2 (see Appendix B) also took
the form of a semi-structured interview. The interview started by explaining the study, providing
some background about the research, and discussing the concepts that unfolded in the literature
review. Next, the participant shared their background, current job, and journey to their current
role. I then turned to the protocol prepared as a framework for the semi-structured interviews.

42
The interviews consisted of 11 open-ended questions designed to explore how the credit unions
engaged Black entrepreneurs and overcame internal and regulatory challenges faced by the credit
union when trying to expand the services offered to BOFs.
The interviews of Panel 2 participants took between 50 and 75 minutes. I held the
interviewers on Zoom. Interview schedules accommodated the credit union executives’ needs.
After gaining participant agreement, I recorded and transcribed the interviews using Zoom’s
built-in capability.
Data Analysis
Data analysis started during the panel selection process. By engaging organizations that
provided services to Black entrepreneurs and the African-American Credit Union Coalition to
help select panel participants, there was an opportunity to collect demographic, classification,
and measurement data about the BOFs and credit unions represented by panel participants.
Merriam and Tisdell (2016) suggest data analysis is possibly the only area of qualitative research
where there is a preferred approach. The authors say that data collection and analysis should
happen simultaneously, with a strategy to iterate between detailed analysis (trees) and anchoring
back on the problem of practice (forest). Figure 5 shows the iterative data analysis approach
described by Merriam and Tisdell (2016) and used by this study.
For the Panel 1 interviews, I reviewed each transcript against the recording to ensure the
accuracy of the data collected. Following each interview, preliminary data analysis allowed the
opportunity to identify trends and refine notes taken during the interview. As interviews
progress, incremental analysis identified early insights into common experiences, challenges, and
potential recommendations. The preliminary analysis of Panel 1 data focused on dissecting the
experiences of Black entrepreneurs as they traversed the ecological systems model shown in

43
Chapter Two, Figure 3. Following Panel 1 interviews, a holistic review of the data and initial
analysis informed the interview process of Panel 2.
Panel 2 interviews followed a similar data review and analysis process as conducted for
Panel 1. Preliminary analysis after each interview helped ensure the accuracy of the transcripts
and provided insights. The interviews for Panel 2 focused on the challenges credit unions faced
when trying to better serve Black entrepreneurs.
Credibility and Trustworthiness
Merriam and Tisdell (2016) stressed the importance of conducting research that scholars
and professionals can trust. The authors noted that rigor in carrying out the study and in the data
analysis are critical elements of producing credible and trustworthy research. Creswell and
Creswell (2018) suggested using multiple procedures to improve the accuracy of findings,
including conducting member checking, and staying aware of one’s biases. In alignment with
recommendations to use multiple methods to enhance the credibility and trustworthiness of
studies (Creswell & Creswell, 2018; Merriam & Tisdell, 2016), I applied rigor in collecting and
analyzing data, conducting member checking, and being mindful of my positionality.
Rigor in Data Collection and Member Checking
The methods used for data collection and member checking were consistent with
recommendations from Creswell and Creswell (2018) and Merriam and Tisdell (2016). For both
panels, the data collected came from the analysis and coding of verbatim interview transcripts to
reduce the likelihood of data collection errors. I reviewed the transcripts while listening to the
interviews to make any necessary corrections where the transcription software misinterpreted the
speaker or failed to capture content properly. Before coding data, I read the interviews and
looked for themes that could provide a general understanding of how best to organize the data. I

44
then organized the data from the interviews into themes and matched codes to quotes using an
Excel database. While coding the data, the consistency of code definitions was a priority.
I conducted several member checks to reduce the risk of improperly interpreting the data.
Allowing participants to comment on emerging findings through member checks is a way to
minimize credibility and reliability risks (Merriam & Tisdell, 2016). Realizing member checking
can be a burden for the participant, I spot-checked the emerging trends with several individuals
from both panels. For Panel 2, I was able to discuss initial findings with some of the participants,
which allowed me to sanity-check the emerging findings.
Researcher Positionality
The racial wealth gap in the United States profoundly concerns me. Participants in both
panels aligned on the importance of this topic. It was a common connection point for both
panels. Elements of my positionality caused me to be an insider in one group and an outsider in
the other. As a white male in my 50s who is financially secure and an executive in the credit
union industry, I worried that the participants in Panel 1 would question my intent and be
hesitant to share their experiences openly. My positionality also made me an insider with the
participants from Panel 2. My concern entering the process was Panel 2 participants might be
less transparent because of confidentiality concerns. The rest of this chapter explores how this
positionality may affect each panel of participants.
Panel 1
Panel 1 participants were Black entrepreneurs who shared their lived experiences
navigating the banking industry while starting and growing their employer business. Race, lived
experiences, and industry made me an outsider in this group. Compounding my status as an
outsider is my role as a credit union executive. I worried that Panel 1 participants might question

45
my intentions or potentially consider me untrustworthy. Merriam and Tisdell (2016) suggest that
researchers can be successful in interviewing participants as an insider or outsider, provided the
interviewer remains aware of “biases, predispositions, attitudes, and physical characteristics that
affect the interaction and the data elicited” (p. 130).
Knowing the importance of the best practices learned by these participants, I was careful
to consider my positionality relative to Panel 1 participants. I explained my purpose and passion
for addressing the factors that make the racial wealth gap in the United States an enduring
problem. I was deliberate in acknowledging our differences and thanked them for their
willingness to share their unique background and learnings. In my experience with Panel 1
participants, my position as an outsider faded away quickly. The participants were enthusiastic
about addressing the racial wealth gap and were eager to share their learned best practices.
I believe a contributing factor to the participants’ openness was the self-confidence that
comes with running a successful business. Because the selection criteria for this panel were
Black entrepreneurs who had successfully started and scaled a business, the participants enjoyed
a sense of success and did not feel financially insecure. Even though I am an outsider with
respect to race, life experiences, and profession, my positionality did not seem to affect the
participants’ willingness to engage in the conversation.
Panel 2
Panel 2 participants were credit union executives. The participants were all over 40 years
old but were diverse from a gender and race perspective. All of them have been in the financial
services sector for most of their careers. Although I am a different race or gender from some of
the participants, the affinity that comes with long careers in the banking industry made me an
insider with this group of participants. Entering the study, my most significant concern was

46
preventing confirmation bias. Because of my own expertise in the industry, I wanted to safeguard
against my personal thoughts about the answers to the questions I was asking. I was also
concerned about the potential for the Panel 2 participants to provide industry-standard answers to
the questions being asked. Weiss (1995) warned that in some scenarios, the participant might
provide answers that make them, or their organization look better. Getting transparent, robust,
and innovative answers to these longstanding questions was my primary goal.
To prepare for the Panel 2 interviews, I took time during the recruiting process to select
participants who had a role that was relevant to the study. I also sought out participants who were
known by my network to be interested in creating a fair lending environment for business
owners. In preparation for the interviews, I researched each participant through my network,
LinkedIn, and their credit union website so I would have a sense of topics where the participant
would have significant knowledge. Lastly, I took the time to share details about the study as part
of the interview itself. Every participant was very engaged. Participants provided critical
feedback about the credit union, the industry, and regulators. They also shared best practices for
engaging Black entrepreneurs and were open about sharing shortcomings.
Ethics
The requirement to protect participants from harm is an essential principle of qualitative
research (Merriam & Tisdell, 2016). Prior to recruiting participants, I submitted the study and
research plan to the University of Southern California’s Institutional Review Board (IRB). The
submission to the IRB detailed the process I planned to use to recruit and interview participants.
Further, IRB guidelines provided a framework for research intended to safeguard participants
and their data. I followed IRB guidelines and adhered to California and U.S. information security
requirements with respect to personally identifiable information.

47
I took every precaution to protect the participants’ privacy and safety through the
interview, coding, and reporting process. During the recruiting process and again before each
interview, I explained to the participants that their inclusion in the study was voluntary and that
they could withdraw if they wanted at any time. At the beginning of each interview, I informed
the participant that I wanted to get informed consent for their participation recorded as the first
part of each interview. Once I had the participant’s agreement, I turned on the recording and read
the informed consent verbatim. I received agreement from all participants in the study prior to
recording the interview. I provided the participants access to the contact information for the IRB
office. I also clearly identified myself as a student at USC and provided the participants with my
phone number and email. I continued exercising best practices according to IRB guidelines
during the interview, analysis, and coding exercises.
During the interview process, I ensured the participants were comfortable with me
recording on Zoom and offered to let them be off camera if they wished. During the first pass of
reviewing the interview transcripts, I carefully removed all personally identifiable information or
other information related to the identity of the participant or their company. Participants and their
associated companies received pseudonyms during the cleansing of the transcripts. After
reviewing the transcripts and going through the coding process, I deleted all unnecessary
documents. These included the original transcripts, video and audio recordings, and any other
working documents that may have contained sensitive information.

48
Chapter Four: Results and Findings
At a macro level, this study explored how entrepreneurship and credit unions, providing
banking services to Black entrepreneurs, can help address the racial wealth gap in the United
States. Research supports the view that business ownership could provide a pathway to building
personal wealth for Black business owners and broad-based wealth in Black communities
(Greenberg, 2017; Holguin et al., 2022). At the same time, Black-owned businesses are
significantly underrepresented based on population share (Perry et al., 2021). Poor access to
capital is a significant impediment for Black entrepreneurs as they try to start and grow their
businesses (Holguin et al., 2022; Perry et al., 2021). The purpose of this study was to investigate
ways credit unions can help overcome systemic inequities by supporting Black entrepreneurs as
they form and grow BOFs by exploring the following research questions:
1. What best practices do successful Black business owners have to share with other
entrepreneurs about navigating the U.S. financial system while starting a small
business?
2. What affects credit unions’ ability to design and offer the banking and lending
services Black entrepreneurs need?
3. What should credit unions do to support Black entrepreneurs starting and scaling
employer businesses?
This study uses Bronfenbrenner’s EST (Bronfenbrenner, 1977, 1979, 1993) as a
conceptual framework to explore the financial journeys of Black entrepreneurs as they started
and grew businesses. Understanding Black entrepreneurs’ experiences as they traversed the
various systems and interacted with other people, businesses, and systems of power (depicted in
Figure 3, Chapter Two) can uncover best practices that others can use as they start and grow

49
BOFs. Understanding these experiences can also uncover recommended actions credit unions
can take to improve their ability to support Black entrepreneurs.
This chapter presents the findings that surfaced from the semi-structured interviews with
the two panels recruited to take part in this study. The chapter begins with an introduction to the
participants from both panels and includes a description of the credit unions represented by the
participants in Panel 2. The next three sections provide findings to each of the research
questions. The chapter concludes with a summary of the findings.
Participants
The study used semi-structured interviews with two unique populations. Panel 1
consisted of Black entrepreneurs who have successfully started and grown BOF, and Panel 2
consisted of credit union executives who lead the delivery of business banking services. Panel 1
interviews focused on answering RQ1 and RQ3, and Panel 2 collected data related to RQ2 and
RQ3. The Panel 1 interviews explored the best practices identified by these entrepreneurs as they
navigated the U.S. financial system. The interviews with the credit union executives focused on
what affects credit union executives’ ability to design and offer services Black entrepreneurs
need, including the challenges they face while trying to deliver services to BOFs. With respect to
addressing the problem of practice in this study, Black entrepreneurs and credit union executives
shared insights into what additional services and support Black entrepreneurs need from the
financial services industry.
Panel 1
Five Black entrepreneurs who have successfully started and scaled BOFs were the
participants in Panel 1. The study replaces participant names with pseudonyms that start with the
letter “E” for entrepreneur. These participants operate businesses in five separate industries and

50
do business in three different geographic areas of the United States (see Table 3). While each had
different motivations for starting their business, they were all financially motivated.
All participants’ businesses sustained operation for more than 2 years and employed staff or
contingent labor. When it came to securing funding for their businesses, the pathways varied by
participant. Ella could not secure a business loan initially and started her business with a personal
line of credit (PLOC). After getting her footing, she decided that she would self-fund by
reinvestment and only use banking service for business checking, savings, payroll, and bill pay.
Ezra and Evan both had business lines of credit (BLOC), but their pathways to funding were
different. Evan had excellent credit, substantial savings, and a solid business plan. As a result, he
received more than he needed to start and scale his business. Ezra, on the other hand, had a
limited credit history and ended up receiving less credit than originally requested. Three of the
business owners secured business credit, which means there is an asset attached to the loan. In
the case of Ezra and Ethan, their secured loans were for vehicles. Emily had a multi-family
property loan. Table 3 shows business statistics and business credit status.

Table 3
Panel 1 Panel and Business Demographics
Name M/F * HQ Type of business Reason for starting
business
Years in
business
EE Loan Initially turned down
for business loan?
Ella F NE Law firm She could not find a
role that met her
needs.
4 11 PLOC Yes, funded with
personal savings
plus family support.
Ezra M NE Transportation
service
She was seeking
financial freedom.
3 12+ BLOC +
secured
No, but received less
than asked.
Ethan M HI Car rental and
insurance
He was wanting to
supplement his
income.
2 3 Secured No, but started with
personal loan.
Emily F NE Residential
rental
(apartments)
She was offseting
living expenses
and help others.
3 2 Commercial
real estate
No, but needed
extended time and
paperwork.
Evan M SE Construction
franchise
He wanted to shift
from corporate
role.
4 10+ BLOC No, started with
excellent credit and
substantial savings.
Note. M/F = Gender identified by the participant. M = Male; F = Female; HQ = Headquarters; NE = Northeast; HI = Hawaii; SE =
Southeast; EE = Number of employees.
51

52
Panel 2
There were nine credit union executive participants in Panel 2. Panel 2 participants
received pseudonyms that start with the letter “C” for credit union executive. Collectively, the
participants had more than 240 years of experience in the financial service industry and amassed
that experience across 20 FIs. They all currently held executive posts at one of five credit unions.
All participants served both consumer and business banking customers. Their roles at the time of
the interviews ranged from the top executive at one of the largest credit unions focused on
serving underserved communities (Cato) to heads of business banking (Cloe, Cora, and Cris).
There was also representation from leaders of community engagement and marketing (Cole,
Clem, and Chip), and the heads of operations or product development (Case and Chad). Table 4
provides insight into Panel 2 participants’ demographics relative to this study.
Table 4
Panel 2 Participant Demographics
Name Title M/F Financial
services career
Number
of FIs
Case Executive vice president operations M 38 3
Cole Chief marketing officer M 36 2
Cloe Vice president business lending F 21 3
Clem Chief community development officer F 27 2
Cora Vice president business lending F 7 1
Chad Chief digital officer and head of products M 34 4
Cris Senior vice president business banking F 29 2
Chip Chief community and public affairs M 26 2
Cato President and chief executive officer M 21 1
Note. M/F = Gender identified by participant. M = Male; F = Female

53
The credit unions represented by Panel 2 were as equally varied as the executives
interviewed. Table 5 shows the field of membership and a genericized mission statement for
each of the credit unions. Like the panel participants, the credit unions received pseudonyms.
The credit unions varied in size and headquarters. They also have a varied field of members.
CU1 and CU5 both could serve members nationally through their Internet banking, while the
others were more focused on their local communities. At the time of the interviews, these credit
unions had mission statements that sought to serve their members, especially those who are most
vulnerable.
Table 5
Credit Union Field of Membership and Mission
Credit
union
Headquarters Presence Internet
field of
membership
Mission
CU1 West Coast 4 States National We put people over profits to
enable financial freedom for
members.
CU2 Pacific Northwest 1 State Local Working together to Build
corporative communities.
CU3 Southeast 1 State Local Giving back to communities to
enable financial, health, and
emotional well-being.
CU4 Mid-Atlantic 1 State Local People helping people to meet
each individual’s needs.
CU5 Midwest 2 States National Putting people first because our
members’ stories matter.

54
Research Question 1: Best Practices
The first research question focused on the best practices used by successful Black
entrepreneurs as they started and grew their businesses. The semi-structured interview of Panel 1
participants explored their journey as they interacted with the network that makes up
Bronfenbrenner’s (1977, 1979, 1993) ecological systems (depicted in Figure 3, Chapter Two)
and navigated the U.S. financial system as they started their small business. Three findings
emerged from the data: (a) prepare yourself financially, (b) have a plan, and (c) persevere. Table
6 shows how each of the participants related these best practices to their business building
journey and engagement with banks.
Table 6
Best Practices When Starting and Sustaining a Business
Participant Prepare
yourself
financially
Have a
plan
Persevere How the participant felt these best
practices affected their business
building journey
Ella Sustainability and credit
Ezra Sustainability
Ethan Credit
Emily Credit
Evan Sustainability and credit

55
While these findings would be best practices for any entrepreneur starting a small
business, the participants’ experiences made these findings stand out as especially important for
Black business owners given the built-in inequities in the financial system that create roadblocks
for Black entrepreneurs in the United States. Table 7 examines how these findings align to the
themes that appear in the literature review in Chapter Two.
Table 7
Panel 1 Findings Alignment to Concepts Identified in the Literature Review
Finding Concept References
Prepare financially The inequities that affect Black
households also affect Black
entrepreneurs. Individual credit issues
affect the business owner’s credit
readiness.
(Baboolall & Fitzhugh, 2021;
Kroeger & Wright, 2021)
Have a plan Research showed that inadequate
business planning and credit
knowledge led to poor outcomes for
Black entrepreneurs when looking for
financing. Lack of business and
financing knowledge leads to
increased failure rate.
(Baboolall & Fitzhugh, 2021;
Bates et al., 2022)
Persevere Black entrepreneurs experience a higher
failure rate than White entrepreneurs.
The higher failure rate tie to
inequities in the U.S. financial
system.
(Baboolall & Fitzhugh, 2021;
Bates et al., 2022; Kroeger &
Wright, 2021)

56
Prepare Yourself Financially
All five Panel 1 participants called out financial preparedness as an essential element of
their success in starting and sustaining a business. Understanding the requirements to secure
credit and amassing savings to bridge slow periods when starting a new business is good advice
for any entrepreneur. While none of the participants specifically called the advice to prepare
yourself financially as a best practice that is exclusive to Black entrepreneurs, the unique
challenges faced by Black entrepreneurs as they navigated the financial system in the United
States made this advice especially relevant to Black business owners. Research shows that the
inequities that disproportionately affect Black households also create roadblocks for Black
entrepreneurs seeking financial services (Baboolall & Fitzhugh, 2021; Kroeger & Wright, 2021).
The racial wealth gap also disproportionately puts the average Black household behind their
White counterparts when it comes to accumulating wealth (Board of Governors of the Federal
Reserve System [FED], 2022), which means there is less savings available for investment in a
new business. The racial wealth gap, the lack of savings, and credit challenges all present
roadblocks for Black entrepreneurs as they navigate the U.S. financial system. The advice
offered by the study participants to prepare financially is specific advice to Black entrepreneurs
to understand their personal situation and create a plan to navigate the challenges that they will
face.
Financial preparation was a gap for Ella. She noted her journey started from a position of
weakness, saying, “[I had] just gotten out of school, no job, not much income.” She went to the
bank to seek help, but as one would expect, the lack of savings, income, and business experience
resulted in a negative outcome when it came to securing a loan. She noted that her family helped
her occasionally with a loan, saying, “It’s like I had to turn to my family to borrow from my

57
family.” However, they were not wealthy and could not provide a personal guarantee for her
business loans. Her experience at the bank seemed typical for a new business owner, but FI did
ask for substantial documentation for a small line of credit. She described the experience like
this,
Oh, we need to have this from you and this [income statement] and see all this
information. I’m like, well, it is a new business. I don’t have any revenue for the business
yet, so that’s why I’m coming to you to try to get a line of credit to cover me until I start
generating revenue.
As she noted, was unable to secure a loan because she did not meet the requirements that the
bank set. She discussed her experience without noting any perceived bias or racism, just noting
she was not prepared financially.
The need to prepare yourself financially is not only about a business plan or generating
revenues; it is about addressing the blemishes or gaps in your finances. Brie worked to close the
gaps identified in the original process, but a lack of a plan to build personal and business credit
impacted her ability to get business funding. She described her frustration with the process,
saying, “Even though I can prove that I have the revenues, [cash] in the account, receipts, and I
have all this stuff [I was still declined] … now it’s my credit.” Securing a loan was an ongoing
struggle for her. Not fully understanding how to prepare herself financially to be credit-ready,
Ella eventually gave up on banking, “I just said, okay, I don’t need it.” She financed her business
through sweat equity and savings. She described her plan of action, saying, “I don’t have to
stress to say, oh my gosh oh my gosh, will I get a line of credit from the bank … I have put aside
a savings that I become my own bank,”

58
When Ezra started his business, he had personal credit, but still struggled to fully fund his
business via a business loan. His lack of history running a business and an incomplete funding
plan resulted in Ezra getting only a part of the loan he was seeking. He described the process of
getting that first business loan like this, “Yeah, it’s a difficult process. The first time they didn’t
give me [the full amount], they give me only 10,000.” He went on to say, “You have to have
some cash because the bank; they cannot trust you. They see your income, and they cannot trust
you.” Ezra’s experience of receiving less funding than requested is common for Black business
owners. According to a 2022 FED report, BOF were twice as likely to be declined a loan and
twice as likely to receive partial funding if they were approved compared to White-owned
employer firms (U.S. Census Bureau, 2022; Wiersch & Misera, 2022).
As Ezra’s business grew, he developed a banking and business history. Ezra addressed
the weaknesses he perceived as impediments from securing full funding for his first business.
After running his first business for a few years and disciplined preparation, he was able to
finance his second business receiving a BLOC for $200,000. He described the experience like
this:
Yeah, because you got the track record because they see your bank [accounts], you have
some money, you have some cash, you have some assets too. You have cars; you have a
website that [is] working. You have some assets, so they trust you more than the first
time.
Finally, Ezra offered this advice for someone who might not have the best credit history, “First
of all, you have to have something [in] saving, then do something you want. Most of the people
they think, oh, if I do business for one year, I going to be rich … you have to be more patient.”

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The advice offered here was that preparing yourself financially goes beyond a business plan,
revenue, and credit. It also means having a cash buffer to help bridge the tough times.
Ethan, Emily, and Evan all started their business journey with good credit and cash
reserves. They noted that a high level of financial preparedness is an advantage for Black
entrepreneurs when they seek business loans. Emily indicated her journey started off easier
because she was able to secure a loan through the bank, saying this about her experience, “And
then the first thing is mentioned about my credit score, which was excellent. My credit score and
I did have some savings. So, everything, it was [in order] and look[ed] good on my application.”
She went on to say, “I think the process is easier because I had the good credit, but I also had
[credit] with excellent credit and with the saving.” Ethan and Evan offered their insights as
advice versus a statement about their own journey (see Table 8). They felt strongly that bank
funding is essential and to get funding, you must be credit ready. Research and industry data
indicate Black entrepreneurs are more likely to not get credit because of the inequities that affect
them as individuals (Baboolall & Fitzhugh, 2021; Kroeger & Wright, 2021; FED 2022),
preparing oneself financially is essential. While they did not specifically call out credit readiness
as an issue affecting only Black entrepreneurs, they said if you are not ready, then having a plan
for how you can prepare yourself to be creditworthy is critical to successfully starting and
growing a business.

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Table 8
Advice on Financial Readiness From Ethan and Evan
Name Advice about financial readiness
Ethan “So, obviously, in this country, credit is your golden ticket. So if you have good
credit, then there’s a lot of business funding available.”
“Depending what you want to do, depends and everything come back to funding so
you can have the best idea for business in the world, but if you’re not capable of
being funded for to get it started, then it’s just a dream.”
Evan “I guess the biggest characteristic was what I consider proper money management.”
“And I would always still do try to understand how I’m going to be graded and
how I’m going to be measured. How am I going to be judged financially and
make sure that those attributes are in order, because it’s not necessarily a secret
as to the things that a lender’s looking for.”
“I think the first thing would be in your preparation, understand who you are on
paper, you’re a good risk or a bad risk, you’re a medium risk. Yes, I have a few
bumps and bruises. Understand and be honest with yourself of what’s going on
from there. What is your plan to make that better.”
Ethan and Evan had both come from humble means, but through their experiences had
developed strong financial habits and prepared themselves for the process of running a business.
They recognized that this is not always the case for many Black entrepreneurs. Evan’s comment,
“[You must] understand who you are on paper … understand and be honest with yourself of
what’s going on from there. What is your plan to make that better,” resonates with the research
that many early-stage BOFs have unmet financial capital needs (Fairlie et al., 2022; U.S. Census
Bureau, 2022) and have difficulty obtaining capital (Baboolall & Fitzhugh, 2021).
All five Black entrepreneurs in the study called out the need to prepare oneself
financially, but they did not specifically call out systemic bias in the financial system as a

61
foundational reason for working on their financial readiness. The entrepreneurs in this study all
successfully developed and grew businesses. They overcame challenges because they took time
to prepare financially. Their focus was on what they did and what they thought others should do,
not the reasons why they needed to work on their credit preparedness in the first place.
As an executive in the financial service industry, I noticed an underlying trend that went
unnoticed by the participants as they were on their business-building journey. Each of the
participants experienced some level of judgment that is difficult to attribute to anything other
than biases about race, socio-economic status, or preconceived notions. The following are
examples of potential bias experienced by the Panel 1 participants.
• Ella had successfully earned a law degree and passed the State Bar exam. She had no
significant debt and no financial blemishes on her credit record. However, Ella could
not secure even a small operating loan for her business.
• Ezra had excellent personal credit. His experience in the limo business as an operator,
driver, and schedule qualified him to run this business. Despite having strong
personal credit, savings, and substantial experience in the industry, he did not secure
full funding from his bank. He built his business on the back of his personal credit
because he could not secure full business financing.
• Emily had excellent credit and proper seed capital. She had strong work references.
While she received a business loan to fund the purchase of her multi-family
commercial property, the bank asked for unreasonable levels of documentation that
seemed extreme for the industry.
It is impossible to know if underlying bias, systemic racism in the banking system, poor
engagement by the bank employees, or flawed regulations drove these unusual results, but they

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certainly underscore the importance of credit readiness and financial preparation. Preparing
yourself financially is a first step, but it is also important for Black entrepreneurs to have a plan
for their business.
Have a Plan
Three Panel 1 participants discussed how a business plan was a necessary part of securing
credit and successfully starting a business. Like the advice to prepare yourself financially, having
a plan is sound advice for any entrepreneur starting a business. Bates et al. (2022) suggest that
getting access to credit is not necessarily a panacea for Black business owners. The authors point
to the lack of a clear plan of how entrepreneurs would use financing as a failure point for many
Black businesses. The advice from the Black entrepreneurs in Panel 1 to have a plan speaks to
this gap called out by the research.
While Ezra and Emily did not specifically mention the importance of a plan, it was clear
that they were working within a mental framework for what success looks like for their business.
For Emily, she knew she wanted a business to supplement her income. She also wanted a
business that would not require her fulltime engagement. She defined success like this, “My goal
is to start something small, [a small] business. So, it came to my mind that the idea, that of
multifamily house, that might be a good income and a business to start with.” Her plan was
simple, which allowed her to avoid unnecessary complexity. Ezra’s plan was also
uncomplicated. He started with a business where he had broad experience and a full
understanding of the operation. Ezra said,
[The business is] something that at least [I know] something about. How to [run] the
business. I’ve been working 6 years for [a similar business], so it’s better for me to start a
business that with something that I know.

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Ezra’s experience gave him the skills he needed to run all aspects of the business and made it
easier to focus on the key activities that moved the business forward. Emily’s plan to keep her
business simple allowed her to start and run her business to drive passive income while keeping
the stability of her fulltime job. Neither Emily nor Ezra had formal business cases, but had a
mental model based on deep experience and understanding of the business they were starting.
Ella, Ethan, and Evan, on the other hand, specifically called out the importance of a
business plan in their interviews. For Ella, the recommendation related to her lack of a business
plan and how not having a plan made securing a loan difficult. She talked about the excitement
she experienced when she first went to the bank, saying, “I went to apply for a line of credit, I
had just gotten with the local bank and then they were telling me all about the different programs
and stuff that they have for small businesses.” Unfortunately, she said, that excitement turned to
disappointment, “and then they wanted a business plan.” The impact of not having a plan
affected her prior to securing a loan. The challenges she faced as a Black entrepreneur who did
not have any business experience, personal or family wealth, and poor credit from her situation
almost stopped her from being able to start her business.
For Ethan, the importance of a plan came through in the form of advice and aligned with
the research about why Black-owned businesses fail. Bates et al. (2022) showed that the absence
of business and financial plans are leading causes of Black-owned businesses failing even after
successfully securing financing. Ethan’s view was the reciprocal is also true; having a plan
increases a Black entrepreneur’s chances of success. Talking about the advice that he would give
to other Black entrepreneurs starting a business, Ethan said, “Have a plan. I have a solid plan.
[Black business owners should have a] business plan, funding plan, [and] learn as much about
different ways of funding and not just go to something blindly.”

64
Evan also described the business plan as a key element of why his business was
successful, saying, “What enabled me to get six-digit loans [is] because I [could] say, here’s my
business plan.” He also offered it as advice for Black entrepreneurs thinking about starting a
business, saying “A lot of it is based on your [history] because there is no corporate credit at that
time. Who are you? What have you been doing? What do you want to do, and how do you
propose you get there?” Understanding that your plan should tie to your history, including any
financial roadblocks one might have experienced in their personal finances, was a point that
Evan stressed. Understanding how one’s plan intertwines with one’s financial history is relevant
for entrepreneurs who might come from historically marginalized communities where systemic
bias in the financial system causes them to start their business-building journey at a deficit.
While having a business plan is important for any entrepreneur, the increased failure rate of
BOFs without business plans (Bates et al., 2022) makes this important advice particularly
relevant to Black entrepreneurs.
Persevere
All five Panel 1 participants called out ways they needed to persevere through challenges
or expend more effort than they imagined would be necessary to navigate the financial system as
they built their businesses. Perseverance is a common trait for most successful entrepreneurs,
irrespective of race, but the challenges Black entrepreneurs face navigating the inequities and
roadblocks in the U.S. financial system means perseverance becomes a necessity. The difficulty
Black entrepreneurs face as they start and grow a business is evidenced by the significant
underrepresentation of BOFs in the United States (Wiersch et al., 2022). The slow BOF growth
rate of only 20 basis points between 2002 and 2021 (Fairlie & Robb, 2010) indicates the
environment is not getting any easier. Kroeger and Wright’s (2021) research found that Black

65
entrepreneurs have a higher failure rate than White entrepreneurs due to racial bias associated
with securing capital and financing. Even after securing financing, there is a higher failure rate of
BOFs due to ongoing challenges in running the business and utilizing the capital effectively
(Bates et al., 2022). As suggested by the study participants, Black business owners, need an
enduring commitment to working through the challenges and financial roadblocks Black
entrepreneurs face when starting and scaling their businesses.
The ongoing commitment required to navigate the financial system and keep their
business running successfully came through in the discussions. From an EST perspective
(depicted in Figure 3, Chapter Two), commitment means facing challenges and persevering
when your family and friends (microsystem) are not or cannot be supportive, putting in long
hours when you cannot hire employees because of the business’s financial condition
(mesosystem), and figuring out how to self-fund the business when turned down for credit by a
FI (exosystem). While not every participant described a challenge in all three of these systems,
all of them described challenges that required perseverance and commitment. Table 9 shows
some of the challenges that the participants worked through during their journey to start and
grow their businesses.

Table 9
Challenges Shared by Panel 1 Participants When Starting Their Business
Name Microsystem Mesosystem Exosystem
Ella “I remember months where my family
wasn’t able to help me. I had my
credit card, so I was able [to bridge
my company expenses using my]
credit card.”
“You’re putting everything, your
energy, into it because it’s going to
be a testament of your fate … it’s
going to push you to say, man, I
wish I had my 9-to-5.”
“I was not able to get the loan.”
Ezra “Even me, my friend, they told me, oh,
you’re going to lose this $50,000.
You’re going to lose it.”
“In the first year, I used to work by
myself to do everything. It was
tough time … and you don’t make
enough money.”
“In the beginning, it was tough. If you
want $10,000, they look at your
history; nobody will give you [a]
loan.”
Ethan “So, it was a few growing pains when it
comes to getting funding, right? “
“I didn’t know anything [about
securing business credit]. “
Emily “At first, my mother were worried that
I’m going to go and get the
[mulifamily rental] house and be
there for the first time by myself.”
Evan “I think that was a giant mistake I
made. I suffered through a
relationship with a big bank [who did
not care about me or my business]
when I really should have just gone a
different way.”
66

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Ella and Ezra shared specific advice when it came to being committed. They both
described the demands the business puts on a person as extreme. Ella describes the business like
a baby that requires full-time attention, saying, “It’s kind of like you have to treat it like a child.
You have a young baby.” She also shared this advice for anyone thinking about starting a
business.
Well, before you do [start a business], make sure that you really are serious, and you
understand that it’s going to become your entire world. It’s going to be your every
moment waking up and breathing in the sense that you go to bed thinking about what you
need to do.
Ella lamented, given the financial challenges, that you will second guess your decisions and
question why you started the business, stating, “Did you do this right, or what’s the next move
you need to make that’s going to keep it afloat?” Ezra shared similar views regarding the effort it
takes to start a business, saying, “When you work for somebody, after you finish your 8-hour
shift, that’s it, you’re done working. But if you have your own business, you have to be 24/7.”
The perseverance required to start and scale a business is significant for anyone. However, given
the systemic issues in the financial system creating roadblocks for many Black entrepreneurs, the
task can be even more daunting.
The Panel 1 interviews explored what best practices successful Black business owners
used while navigating the U.S. financial system while starting a business, and together identified
three best practices: (a) prepare yourself financially, (b) have a plan, and (c) persevere (see Table
6). The next section explores the credit union side of the Black entrepreneur business banking
equation. Specifically, what affects credit unions’ ability to design and offer the banking and
lending services Black entrepreneurs need.

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Research Question 2: Credit Union Influencers
The second research question sought to understand the ability of, and the challenges
faced by credit unions when trying to design and offer banking services to Black entrepreneurs.
Nine credit union executives from five different credit unions discussed their engagement with
the Black community and their experience delivering lending and banking services to Black
entrepreneurs. The results of these interviews showed significant convergence around three
themes that are potential challenges for credit unions serving BOFs: (a) regulatory limitations,
(b) internal barriers, and (c) a lack of understanding of what Black entrepreneurs need. Table 10
shows the alignment between the finding identified in the data from the Panel 2 interviews with
the concepts identified the literature reviewed in Chapter Two.
Table 10
Panel 2 Findings Alignment to Concepts Identified in the Literature Review
Finding Concept References
Regulatory limitations Regulation puts limits on who and
how much credit unions can lend
to businesses.
( NAFCU, 2022;
Aggregate MBL Limit,
2019)
Internal barriers Credit unions look for more
profitable lending pathways due to
limited risk profiles and regulatory
limits on business lending.
(Ritter, 2020)
Do not understand need Credit unions exist to supply banking
and lending services to
underserved communities. They
were able to do so because of their
understanding of their needs.
Without this understanding, credit
unions will fail their mission.
(NAFCU, 2022; NCUA,
2022a)

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Table 11 captures how each of the Panel 2 participants saw these impediments. All
participants openly discussed all three potential roadblocks, except Cora, who did not discuss
internal barriers, and Cris, who did not discuss the lack of understanding of the needs of Black
entrepreneurs. Not all participants experienced the challenges as a barrier to delivering banking
and lending services to Black entrepreneurs because they felt they had found workarounds and
had action plans in place.
Table 11
Credit Union Impediments to Delivery Banking Services to Black Entrepreneurs
Name Regulatory limitations Internal barriers Lack of understand
Case Improving Workaround Issue
Cole Issue Issue Issue
Cloe Workaround Workaround Action plan
Clem Issue Issue
Cora Issue Action plan
Chad Issue Improving
Cris Issue Issue
Chip Issue Issue Issue
Cato Issue Workaround Action plan

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Regulatory Limitations
All Panel 2 participants commented on regulatory limitations as an impact on how credit
unions serve Black entrepreneurs. Six of the participants saw regulatory limitations as ongoing
issues, while one suggested the regulators are improving, and two others shared workarounds to
the regulatory barriers (see Table 11). When viewed from the eyes of a Black business owner,
the regulatory limitations show up as vague and invisible forces that work against them when
they are seeking banking and lending services. From an EST perspective, these regulatory
limitations are part of the Black entrepreneur’s macrosystem (depicted in Figure 3, Chapter
Two). To the credit union, these regulatory limitations can restrict the ability to write loans,
prevent the credit union from serving a member because they do not meet field-of-membership
requirements, or cause the credit union to make lending decisions based only on risk profiles.
Cole, Clem, Chad, Cris, Chip, and Cato specifically discussed the regulator-imposed
business lending cap. The cap limits how much a credit union can lend to businesses as a
percentage of total assets (Aggregate MBL Limit, 2019). Cole, when talking about what might
limit their credit union from more aggressively making business loans to BOFs, said it this way:
From a regulatory standpoint, just all credit unions have a member business loan cap.
Only 11.25% of our assets can be held in business loans. So, at some point, we would hit
that type of cap potentially. So that could potentially be a ceiling in terms of our efforts.
Clem also called out the cap as a barrier, saying, “So, having that cap on the amount of business
loans as compared to assets, that in itself is an impediment.” Cris also voiced a concern about the
lending cap but put it in terms of a recommendation, “So could the regulators in the credit union
industry go out on a real limb and define a diverse lending program or a special-purpose lending
program … so it doesn’t count at all [against the cap]?”

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The cap is an obstacle, but the limitation also influences lending decisions because it
makes capital an even more scarce resource. As a result, credit unions become more conservative
when making lending decisions. Chad confirmed the cap was an issue, saying, “We all know we
are capped on our ability to loan to small businesses. And in our case, we’re actually
approaching that cap.” He continued, focusing in on how the cap impacts decision-making, by
saying,
If money is a scarce resource and it always is, right, for all of us forever, then how are we
going use that [money]? We’ll always go through some sort of filter. And when you have
a constrained resource [money], on a constrained [product] resource [for a] member as
this lending cap [is], it could very well have, in fact, impeded our ability [to make loans
as] we are approaching that cap.
The cap limits the total business loans a credit union can make and causes credit unions to be
more conservative when making business loans.
Credit unions are more conservative with their business lending because they operate
with a target return on assets (ROA). ROA is a broad measure of how well credit unions manage
risks, operating expenses, and revenue. ROA is an important measure for NCUA examiners.
Cato said it this way, “You know what drives that, the government. You know. So, we are
required to do full risk ratings and assessments on these business loans.” Cato detailed the
challenge, saying,
The regulators came in, come in, and if something risks higher, they look at it, and then
they scrutinize you for that decision all the while they’re the ones saying, Hey, we, you
need to be doing more to help these businesses and help members you know, et cetera, all

72
while. Then they come in and scrutinize you. It’s one of the things that drives me crazy
about [examiners].
The cap and regulatory pressure focused on risk management pose real barriers to these credit
unions, but they are not the only way regulatory pressure affects the delivery of business banking
and lending services. Chip also called out regulatory performance measures while talking about
limitations impacting their ability to make more loans to BOFs, saying, “So there’s no question
that if you look at how, from our standpoint, that would be NCUA, it’d be FDIC for the banks,
how do they [the NCUA] measure what is a great performing financial institution?” When asked
if these standards make the credit union feel like they cannot make these loans, Chip said, “We
can’t because we can’t have that ROA slip anymore, or we now get judged and look like as
we’re not a good performing financial institution.”
Clem also voiced concerns about the elevated level of regulation and a lack of
understanding, saying, “I think that we are heavily regulated on the commercial side now.” Clem
continued by saying, “I think as the industry as a whole, there is a lack of knowledge when it
comes to commercial lending.” Cora also believed regulatory limitations create barriers to
helping Black entrepreneurs, saying, “I would say the field of membership, too. Those [are the]
restrictions; we have to say no to some people because they’re not a member. They don’t qualify
to be a member, and therefore we cannot help ‘em.”
Case and Cloe felt like the regulators were making a change or that their credit unions
may have found workarounds. Case said this about being purposeful in using special-purpose
lending programs, “The NCUA’s support for and advocacy of these special credit purpose
programs where they’re basically giving us regulatory air cover to provide different rates and

73
terms to traditionally marginalized or protected classes on the business side.” He continued by
saying that credit unions must be intentional about using these mechanisms:
So, I think I do believe that the regulators have really started to think more progressively
about this, and then formally are giving us some legal air cover. If we wanted to credit
unions and banks, if we wanted to, [could] pursue these types of things.
Cloe presented a similar point of view, suggesting, “I think some of the things that are
happening, [is] the regulatory agencies are willing to look at things and provide special credit
documentation.” Asked if the credit union was intentional about lending to BOF, Cloe said, “you
just have to write up what you’re trying to do and how you will mitigate those risks and create
these special credit programs.” Cloe went on to say that if your concern is the business lending
cap, then that credit union needs to be intentional about lending to historically marginalized
populations by teaming with or becoming a Community Development Financial Institution
(CDFI). Cloe specifically talked about her credit union saying, “We are pushing against our cap,
but there’s also a waiver that we can ask for because we’re CDFI to get increased caps.”
During the interviews, the Panel 2 participants carefully chose their words when
discussing regulatory barriers. Probing questions about systemic bias resulted in hesitation by
more than one of the participants. One participant even noted their gratitude that the interview
was anonymous because they did not want quotes attributed to them directly. The participants
who spoke about regulatory barriers agreed that the industry’s intent is positive, but some rules
designed to keep credit unions safe also have the potential to disadvantage certain populations.
Several of the participants discussed the need to be purposeful in working through industry
regulations that could negatively impact underserved and historically marginalized populations.

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Regulatory barriers are a limitation for credit unions as they seek to make more loans to
Black entrepreneurs as they try to start and grow their businesses. While Case and Cloe have
identified some methods of working around these barriers, regulatory constraints continue to be a
concern for most of the participants. These regulatory limitations bleed into and drive the second
area of concern raised by Panel 2 participants, internal barriers.
Internal Barriers
All but two of the participants indicated internal affected how credit unions support Black
entrepreneurs starting businesses. As seen in Table 11, four of the participants noted there were
continuing internal barriers facing their business banking operation when it comes to supporting
BOFs. Three other participants identified similar internal barriers but noted that workarounds are
possible if the credit union is willing to be intentional about making these loans.
Credit risk and ROA are the primary internal barriers named by Panel 2 participants.
Clem was very direct about their internal barrier, stating, “We’re just risk adverse, I think, when
it comes to commercial lending.” Identifying the same barrier, Cole said, “If we want to provide
access to capital closer to what maybe a CDFI does, we have to get more comfortable with, we
have to increase our risk appetite.” Cole showed a little frustration with this lack of risk appetite,
saying it is the mission of credit unions to help historically marginalized and underserved
populations. “The citizens of the United States are paying credit unions to be different than
banks. And if our risk profile looks like a community bank or a commercial bank, that’s not what
we should be doing.” Chip expanded the conversation to the broader measure of performance
ROA. Chip believed credit unions hide behind risk and ROA targets to take a more conservative
path, saying, “So, if there’s a certain liquidity number that you have to hit, you’ll use that as a
way of [saying], like, well, but we can’t do more risky loans.” Credit risk and ROA are not the

75
only barriers. Cris, talking about risk in terms of reputation, said, “It’s really our assessment of
risk from a reputational perspective.” The concern is the potential for backlash for focusing on a
single race or group. Cris continued by saying, “If we do it wrong, wonder if we go out there and
we start providing loans to the Black community that we don’t provide to the underprivileged
white community?” The implication is there could be significant reputational risk.
Irrespective of internal barriers and perceived risks, four of the participants thought that
being intentional and courageous about pursuing the mission was a workaround. Case
acknowledged the significant internal barriers, saying, “The external inhibitors are not as hard as
the internal inhibitors.” He quickly added, “Sure, maybe some financial and credit risk [exist],
but that can be capped and contained and managed in a way that would be satisfactory to a
regulator from a safety and soundness point of view.” Cloe made a similar point, saying,
We weren’t established to help just the average person or the person that could get
financing anywhere. We were established to help somebody that needed tools for work or
needed a solution to something where they couldn’t get it out on the open market. And so
just being intentional, going back to our grassroots is something that we embraced.
Cato also called out intentionality. He spoke about making specific changes even though external
and internal observers scrutinize these decisions. They started by saying, “we looked at ourselves
and we looked at some of the ways we operated, we recognized that we were hurting some of the
marginalized populations.” Cato then talked about some of the actions they took, “We saw that
low-income, minority, underbanked individuals are being impacted, really negatively. And we
made some changes to our fees.” They wrapped it up by saying, “It cost us about $10.5 million
of revenue. but we look at it as ‘Hey, we’re a not-for-profit financial cooperative.’”

76
As with the discussions about regulatory barriers, Panel 2 participants kept conversations
somewhat generic when discussing internal barriers. Probing questions about the potential
presence of systemic or implicit bias made some of the participants uneasy. All of the credit
union executives stressed their and their credit unions mission to support and improve the
financial health of underserved and historically marginalized communities. They all seemed
sincere, and as noted, shared some specific examples about how they were engaged in improving
the financial health of their members and the communities where they live. A specific theme that
emerged was purposeful engagement to push through internal performance expectations.
Seven of the nine Panel 2 participants named internal barriers that stand in the way of
credit unions being more active in providing lending services to Black entrepreneurs. Even the
three participants who shared workarounds they used to mitigate how the internal barriers impact
their ability to serve Black entrepreneurs stressed the difficulty and the importance of
intentionality. Even if credit unions figure out how to work through the regulatory limitations
and internal barriers, eight of the participants indicated that they did not clearly understand the
banking needs of Black entrepreneurs.
Lack of Understanding of What Black Entrepreneurs Need
All but two of the Panel 2 participants identified a lack of understanding of Black
entrepreneurs’ banking needs as an issue. Three of the credit union executives indicated they felt
they were on the right path because they had instituted action plans to understand their Black
entrepreneur members better. The challenges called out include a lack of community
engagement, too few Black employees, and underdeveloped personal relationships with their
Black entrepreneur members.

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The four participants who indicated their credit unions lacked a full understanding of the
needs of their Black entrepreneur members were not saying they have no understanding but need
a plan to build a more fulsome understanding. Case said this about serving Black entrepreneurs,
“We don’t have a full understanding of the needs of the communities.” Continuing, he said, “We
also don’t understand [what] kind of the barriers [Black entrepreneurs face]. And I think those
are different.” Sharing a similar view that the understanding is not robust, Cole cautioned, “Just
don’t guess at it or don’t think we know what’s best for them, but to listen and understand.” Cole
also believed understanding the need early in the entrepreneur’s journey was important, saying,
“And also, I think how can we understand better how we can support them before they need a
loan?” Chad also mentioned that there was not a full understanding of the needs of Black
entrepreneurs or the communities where they were doing business but hoped that this would
improve because of their presence in the community and better representation in the employee
ranks. Chad said,
Our employee base is closer to representative of the communities we serve when it comes
to communities of color. And, so, simply put, when you have more Black employees in
the organization and you listen to them, many times, [but] not always, they live in those
communities as well, or they definitionally are more likely to know more people in those
communities. And so, they’re an important, for lack of a better word, conduit.
Chip called out a lack of understanding in their credit union and suggested that it is more
widespread than others would admit, saying, “So I would say from a general answer, the answer
is no to start with, no, they don’t know. Have no idea.” Chip brought the issue back to one of
ROA, saying, “And it goes back to how we started this off, because they were never in the
profile of a customer or member that you think you can get the most out of.”

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The findings in this section show significant convergence around three key themes when
it comes to what affects credit unions’ ability to design and offer the banking and lending
services Black entrepreneurs need. These themes are: (a) regulatory limitations, (b) internal
barriers, and (c) a lack of understanding of what Black entrepreneurs need. Two of the findings,
regulatory limitations and internal barriers, interact with and compound each other. Several of
the participants shared that being intentional about the mission is important if a credit union
wants to address these three findings. The next research questions explored what changes Black
entrepreneurs and credit union executives thought were needed to support Black entrepreneurs
starting and scaling businesses.
Research Question 3: Supportive Actions
This last section focuses on the actions credit unions should take to support Black
entrepreneurs starting and scaling employer businesses. The data that informed the findings in
this section came from the interviews with the Black entrepreneurs, Panel 1 participants, and the
credit union executives, Panel 2 participants. Four themes emerged from the data: (a) credit
readiness, (b) business finance and credit education, (c) personal banking relationships, and (d)
purpose-driven intentionality. Table 12 provides a brief definition of the four themes and how
they show up as an issue or an opportunity for the participants in the two panels.

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Table 12
How Credit Unions Can Help—Emerging Themes
Theme Definition Panel 1
*
Panel 2
*
Credit readiness The extent to which a business owner can get a loan at a
competitive rate. As a program, it would help
business owners mitigate blemishes on their credit
and prepare the best view of their business as they
seek a loan.
CI SO
Business
finance and
credit
education
Education to increase the knowledge business owners
have about how to manage and present the financial
condition of their business and deepen the owners
knowledge of the funding process.
KG SO
Personal
banking
relationships
Many banking relationships are transactional. The intent
of building personal banking relationships is to build
a partnership between the business owner and the
credit union.
MO BN
Purpose-driven
intentionality
Creating programs and a vision that is committed to
working past regulatory and internal challenges to
provide services to Black entrepreneurs. The credit
union must be intentional about every aspect of their
operation to align actions to their purpose.
– OB
Note. CI = creditworthiness issue; KG = knowledge gap; MO = mentorship opportunity;
– = not applicable; SO = service Opportunity; BN = knowledge about black entrepreneur needs;
OB = overcoming regulatory and internal barriers
The first two themes have a dual nature. They show up as gaps for Black entrepreneurs
and opportunities to supply incremental services for credit unions. The third theme, building
personal relationships, creates an opportunity for Black entrepreneurs to gain a partner in their
financial journey and provides credit unions access to understand the real needs Black business
owners have. Purpose-driven intentionality is a theme that runs through the interviews with

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credit union executives as a method of overcoming regulatory and internal barriers to serving
BOFs. Table 13 shows the significant convergence around these four themes across both panels.
Table 13
What Can Credit Unions Do to Support BOFs, and How Can They Do It?
Panel Name
What can credit unions do? How can credit unions do it?
Credit readiness Education
services
Build personal
relationships
Purpose-driven
intentionality
1 Ella
1 Ezra
1 Ethan
1 Emily
1 Evan
2 Case
2 Cole
2 Cloe
2 Clem
2 Cora
2 Chad
2 Cris
2 Chip
2 Cato

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Credit Readiness Program
Credit readiness is a measure of an entrepreneur’s ability to secure credit based on their
assets, cash flow, credit history, and business plan. A credit readiness program helps
entrepreneurs navigate the lending process, mitigate negative elements in their credit history, and
prepare a plan to present the best possible picture of their business when seeking banking or
lending services. Panel 1 participants spoke about the impacts of bad credit and how not
understanding how to address the gaps in credit readiness can negatively impact the business.
The gap in understanding they are describing leads to the suggestion that credit unions should
offer credit readiness programs. Four Panel 2 participants also mentioned the need for credit
readiness knowledge or programs as a critical need when trying to service BOFs.
Panel 1: Credit Readiness Is Critical to Business Funding
All but one of the Black entrepreneurs interviewed spoke about credit readiness as having
an impact on getting funding and something that deserved focus. Ella thought banks could do a
better job helping entrepreneurs navigate the process of improving their credit and working their
way toward credit readiness. Ella said when speaking about the situation where a business owner
had failed to secure a line of credit, “At least if you [the credit union] said, okay, we have a
schooling program where we help businesses get ready to become, to get able to apply again
within six months or whatever it may be.” Ella felt like this could work as a program that leads to
securing a line of credit over time, adding, “Within 6 months or more, you’ll be able to be ready
to be able to get a line of credit from us [the credit union] or to get that loan from us that you
desire.” Understanding the potential gaps in credit readiness and having a plan to address these
gaps is critical to a business owner’s ability to secure funding through a loan.

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Evan recognized the need for entrepreneurs to understand their credit situation and work
toward credit readiness. Evan did not frame it as a problem that FIs need to fix, but instead
described this in terms of what the individual should do. He started by framing the problem,
saying, “I think the first thing would be in your preparation, understand who you are on paper,
[if] you’re a good risk or a bad risk, you’re a medium risk.” Evan then stressed the importance of
having an action plan and working toward mitigating these issues, saying, “Understand and be
honest with yourself of what’s going on from there. What is your plan to make that better?” Evan
felt like one needed a documented and sharable plan, then FIs could get a clear picture of the
credit readiness work the borrower completed. He said, “First of all, before we get to a loan, I’ve
had these bumps and bruises. They were 3 or 4 years ago; I’ve almost cleaned them up and
here’s what I’ve been doing and here’s the steps I’ve taken.”
The impact of not addressing credit readiness gaps is rejection. The entrepreneur will not
get the loan or get less than what they are seeking. Ezra spoke about how a lack of credit
readiness impacted their ability to fund their business. Ezra described the initial process when
they were not really credit-ready like this, “Yeah, it’s a difficult process. The first time they
didn’t give me, they give me only $10,000.” He described the lack of credit readiness in terms of
trust saying, “So, for your first business, you have to have some cash because the bank, they
cannot trust you. They see your income, and they cannot trust you.” Over time, Ezra was able to
establish a strong financial track record and become credit ready as a business owner. After
showing themselves as creditworthy, their outcome was substantially better. He shared his
experience, saying, “So I know that they offer me $200,000. So, see the difference, $10,000 and
$200,000.” The impact to the individual and to the business underscores why the Black

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entrepreneurs in this study suggested it is important for credit unions to support Black
entrepreneurs in their credit readiness journey.
Panel 2: Credit Readiness as a Service
Four of the nine credit union executives interviewed for Panel 2 specifically called out
the importance of helping BOFs navigate the lending process if they have an imperfect credit
history. The other five participants did not take a contrary view, they just did not specifically
mention credit readiness as a program. The four participants who specifically called out how
they approach credit readiness focused on the need to provide help before the need existed,
leveraging partners and special purpose lending programs.
Delivering credit readiness assistance before the need arises is important if credit unions
want to improve outcomes. Cole said, “There could be services and technical assistance, so we
could provide a way before they need capital that might make them better situated to actually
when they’re ready to apply for a loan.” He posed several specific questions about the help the
credit union might be able to provide, saying,
So, how could we start working with entrepreneurs or communities way upstream from
when they actually might be needing loans, or how can we also, if we don’t think we can
provide the capital, how can we identify alternative affordable avenues to capital right
through, whether it’s CDFI or if there’s other community capital projects, things like
that?
The answer to these questions is a program that can help Black entrepreneurs become business
credit-ready and then help them secure funding.
Credit unions do not need to have all the answers, they just need to realize the need is real
and keep asking critical questions about how to improve outcomes. Cora framed the challenge,

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saying, “A lot of our members, especially African American and Black businesses, they have a
high rejection rate.” She then noted that many times, Black business owners do not discover they
have a credit issue until they need the loan. She stressed the importance of starting early,
When they say, oh, I don’t need money. Great! This is the time where we need to talk.
You don’t need money. You don’t need money, but when you come to us, and you don’t
have that business plan, you don’t have the projections, you’re just using a tax guy in
April, that’s not enough. Let’s talk about it now. Let’s get you set up.
Cora continued by describing the program as a multi-step process where the credit union
provides some specific guidance, like, “Here are two or three things that you need to focus on
and come back to me in about three months, a quarter, and within a quarter, and then we’ll talk
about it again.” She noted that this process can be long but is showing promise at her credit
union, saying, “So, I’ve had members that have been with me for years that have not yet been
approved for a microloan, but their credit score has jumped a 100 points because they were,
again, following that roadmap.”
The credit readiness help does not have to come directly from the credit union. Cris
talked about how they leverage a partner, Business Impact CDFI (a pseudonym), to deliver credit
readiness support to their members who did not qualify for a loan. Cris said, “When we decline a
small business owner for credit, we now have a way of directly referring them to [Business
Impact CDFI].” The program offered by Business Impact CDFI is a tuition-based program
designed to help entrepreneurs become credit-ready. Cris’s credit union engages with the
entrepreneur and Business Impact CDFI to help get the business member the help they need. Cris
described it like this, “And we offer a scholarship program for diverse business owners to pay for
the classes that [Business Impact CDFI offers] and get them the support they need to improve

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their business plan, whatever.” These programs work similarly to the program described by Cora.
Over time, the entrepreneur reaches a point of creditworthiness that supports a business loan.
Credit readiness programs improve outcomes, but why should credit unions offer these
programs? Clem said credit readiness support for historically marginalized business owners is an
important role that credit unions play. She described the credit union’s role versus that of a
traditional bank, saying, “So, if you think about the credit unions and where we can fill that
space … I’m trying to help that business owner that may only be in business a year or may be in
business for 2 years.” Clem noted how credit unions must look beyond the classic credit
readiness measurements, adding, “They’re not going to have the robust financial statements.
They’re not going to have the capital to bring to the table to put 20% equity in. That’s the gap
that I think that credit unions can fill.” Helping Black entrepreneurs become credit-ready is
where credit unions should be playing; according to Clem, “That’s going to help close that
wealth gap and that gap as far as access to capital, thinking about filling in the spaces that the
banks, where the banks are afraid to do business.”
All but one of the Black entrepreneurs interviewed saw credit readiness as an important
part of their business-building journey. Four of the Panel 2 participants interviewed agreed that
addressing a lack of business creditworthiness is an important role for credit unions to play.
Credit readiness affects a business owner’s ability to get a loan at a competitive rate and,
according to both panels, needs to be a focus for Black entrepreneurs and credit unions. Credit
readiness programs can help business owners mitigate blemishes on their credit, prepare the best
view of their business as they seek a loan, and improve credit-seeking outcomes.

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Business Finance and Credit Education
As was the case with credit readiness, four of the five Black entrepreneurs saw business
finance and credit education as a critical issue. Four of the credit union executives interviewed
also mentioned entrepreneurs’ gap in knowledge about business finance and credit. The
recommendation was better education could improve outcomes. Participants in both panels
described borrowing know-how, financial literacy, and business money management as areas
where additional support could help BOFs succeed.
Panel 1: Business Finance and Credit Education Is Critical to Business Success
Starting with borrowing knowledge, every entrepreneur interviewed as part of Panel 1
expressed frustration with securing credit. From the application process to the documentation
needed, the participants described securing a loan as a complicated process. Emily expressed her
frustration by wondering if this is something the FI should have helped her with when she was
securing her commercial real estate loan, saying,
I mean I feel like, I don’t know in general, I mean I didn’t know if this is something that I
should be the one who go [to get the information] and [what is the ]etiquette before I get
the house [loan] or [is it] something that the lender or the banker should provide it to me
and make it, my processes easier.
Emily made it through the process by using her relationship with her realtor but believed this is
an area where there is a gap in the banking industry. Emily added, “So I feel like if there’s more
education about this for someone who doesn’t know, it’ll make it easier to understand.” The
know-how to navigate the lending process was not the only gap raised; there was also concern
about financial literacy and how to manage the finances of a business.

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Specific to financial literacy and managing business financials, Ella discussed the topic
from two points of view: first, as a business owner who sees a gap in services provided by
financial institutions, and second, as a lawyer running a firm focused on underserved
communities. When asked what else she might add about what gaps exist in services, she said, “I
think what [I see] is the financial education that a lot of people are [missing], especially in our
minority communities a lot of times.” Later in the conversation, Ella added, “But I think if the
banks have different programs for different minorities within their language or different sectors
of the society within their understanding and concept of the business and lending, it would be
beneficial.” As a person running a successful law firm, who had not successfully secured a
business loan, there was frustration in her voice as she discussed the topic. Turning her attention
to her clients, she echoed a similar view, saying, “I see that even within my own practice where a
lot of them don’t know anything about.” After pausing to have a brief sidebar conversation with
her daughter, she continued her thought, “[They] don’t know much about financial management
and especially when it comes to doing business.”
Filling the business money management knowledge gap is important. Ethan and Emily
shared the view that financial education should start well before the entrepreneur starts their
business. Ethan said this about the knowledge gap, “Education. Education should start at a
younger age, not when someone actually wants to start a business. I think financial education
should be a requirement from high school.” He noted that this is a role that credit unions or other
FIs should play, saying, “[a] financial representative in high schools that actually teach people
about financial or financial institution works or money works out businesses, funding and so on
and so forth works.” Evan did not mention starting this type of education in high school but did

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suggest that it needed to start well before the business owner needed a loan. Evan felt strongly
that this education should come from the FI:
The question is to me, not do you give the loan today, but what do you do today to help
your potential customer base be your customer 18 months down the road, if you had a
financial literacy class at a branch or at a public library run by the bank, okay, not a
contractor. This is somebody on your payroll that’s accountable to you. You advertise,
whether it’s through community centers, churches, or however you can reach that
community, why don’t you start talking to small businesses in the community?
Evan’s questions, while posed hypothetically, framed how FIs might deliver the education
needed by Black entrepreneurs as they start their businesses.
Panel 2: Business Finance and Credit Education as a Service
The credit union cooperative movement is about people helping people. Delivering
education on how to manage the business financials and the lending process is an area where
credit unions can live out their mission. Cole said it like this, “When we think about the building
blocks of financial health, we think about access to education and training.” Financial education
is important to the financial health of the individual and the success of businesses. It is important,
and it is also a gap in services provided by credit unions. Cloe said,
The financial education piece is so huge, not only at startup, but also during the life
journey of a business. And so, I think some of that is an integral piece that if credit unions
aren’t doing it, [they should] at least [be] partnering with others that can because no
credit union can do one thing alone.
The education needed extends beyond managing business financials or navigating the
credit application process, it is about access. Cole noted that the education credit unions provide

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should go beyond information about credit, business plans, and financial management. He
suggested that education programs are a critical part of providing access to credit union and
government programs geared to help minority business owners. Speaking about a program under
development by the Department of Commerce that will provide capital to minority-owned
businesses, Cole said, “So, I think, just how do you help them [minority business owners]? Make
sure they’re resource-rich, meaning that they have access to education tools, networking, all
these things that they may not have.”
Clem also suggested combining education and access to resources. She started by saying
this about their credit union: “So, we take pride in providing access and first of all, providing
equal access to financial services to all people.” She noted that equal access means second
chances and that understanding how to navigate past a mistake is important. Clem continued by
saying, “We provide financial education, meaning let’s talk about how we can help get you from
point A to point B beyond the ask. How can we help really improve the value of your lives?” The
program Clem described seemed similar to Evan’s suggestion that FIs should provide financial
education as an in-house function to drive long-term engagement. Clem noted the importance of
having an in-house capability but also leveraging partners, saying, “We also have in Micro
Enterprise Development Center, and we have someone that leads that center and she, along with
other partners, specifically nonprofits in our industry, we provide classes free of charge to
businesses.” She continued talking about how the program included resources to help
entrepreneurs understand the importance of setting up business credit, which would have helped
Ethan when they started their business on the back of their personal credit. Clem said the
program included content on legal concerns, QuickBooks, and the lending process. Another
important part of education, according to Clem, was understanding the importance of capital. She

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described this as, “Having capital is important, and [Black entrepreneurs] having the ability to
have access to capital [is more important] versus most businesses; they [minority-owned
businesses] drain their personal finances.”
The importance of providing education services focused on financial management, credit,
and access to programs was a common theme shared by the credit union executives. The need for
this type of education was also of immense importance to the Black entrepreneurs interviewed.
For both groups, credit readiness and financial education are critical services that Black
entrepreneurs need. The education programs increase in value when Black entrepreneurs and
their FIs have a more personal banking relationship.
Personal Banking Relationships
Business banking is often just transactional. When FIs build personal banking
relationships with the Black entrepreneurs they serve, it moves these relationships from this
transactional engagement to a partnership that fosters trust. Three of five Black entrepreneurs
interviewed felt that an in-person relationship with their FI was important; the other two had
negative experiences because they did not have that personal banking relationship. There was a
high level of convergence amongst the credit union executives as well. Seven of the nine credit
union executives spoke about the importance of building relationships between the business
owner and the FI. This personal banking relationship fosters trust, allows the FI and business to
understand each other, and opens communication to help create an opportunity to provide credit
readiness or education programs.
Panel 1: Personal Banking Relationships Are a Gap
Three of the Panel 1 participants spoke about the importance of an in-person relationship
with their FI. Ella, speaking about what she thinks FIs should do, said, “I think it’s certain

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clientele [where] you should have that real concierge type of service that they will know more
about this person’s business.” She stressed the need for FIs to develop an advisory role where the
concierge might say, “Okay, this is what you [want], you’re missing something and this is what
you need, but you’re not ready for that. … Let’s work on that credentials together to get you
there so that your business can grow.” The importance of trust in the relationship was critical to
Ezra getting their second loan. Ezra said, “When you have [an] existing business for 3 years, 4
years, and they see you doing great and your bank account, your statements good so they can
trust you and give you more money.” In-person engagement emerged as an important element of
servicing Black entrepreneurs. Emily explained that their limited knowledge about the lending
process led them to engage with their lender in person. She said, “So, I did schedule for in person
too, because I had no idea how I’m going to get the house and the loan and all that.” Continuing,
she noted how this in-person engagement helped, “So, I scheduled with the banker where I went
in person, and [they] explained to me the process.”
The impact of not having an in-person relationship has unintended consequences. For
Ethan, the lack of a relationship with a business banker left his knowledge gap unmitigated. As a
result, he started their business using his personal credit. Ethan described the situation like this,
So, it was all [it has] become a mess. It’s all tied. I have personal and business tied into
one, which I didn’t know about separating from the beginning. So, I probably should took
the time to learn about business [banking] before I started and things would’ve probably
have gotten better that way.
Evan also lamented not having a personal relationship with their bank. He chose to bank with a
large national bank and said this about their relationship with the bank, “[My bank] could care

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less if I move those accounts someplace else … They would never miss me, and they could care
less whether I came in the door or not.” Digging a little deeper into this relationship, Evan said,
I think that was a giant mistake I made. I suffered through a relationship with a big bank
when I really should have just gone a different way. There were better ways and easier
ways that I could facilitate my financial needs as related to the business than dealing with
one of the big few national banks.
Even with all that regret, Evan said, “As bad as they are, I’m reluctant to go find someone who’s
worse.” His commitment shows how sticky even a poor banking relationship can be.
Panel 2: Building Personal Banking Relationships
The stickiness of relationships can be a benefit for any business, including those in the
banking industry. However, the seven credit union executives who discussed the importance of
relationships with their members and the community were more focused on what this
relationship can do for their members. According to these seven credit union executives, the
direct relationship with the business owner is how credit unions can build trust, learn about the
needs, and ultimately help Black entrepreneurs who are credit union members.
Direct relationship with members helps credit unions understand Black business owners’
needs and helps to build trust. Case, when asked about the relationships with Black
entrepreneurs, started by saying, “We don’t have a full understanding of the needs of the
communities. And I’ll say that a few ways. One that we don’t understand the needs as well as we
should. We also don’t understand kind of the barriers.” He shared why he believes building
direct relationships is essential, saying, “So how do you build that trust and solve at the root?”
He was referring to the Black community’s distrust of the banking industry. He went on by
saying, “So, maybe [this is] a nuance, but I’m thinking about the barriers of those communities

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and for their wanting, willingness to be a part of the banking system and then the needs.” He
stressed that it is not about giving money to the community through partners, but about direct
engagement. He finished this thought saying, “It’s how do we have a meaningful relationship
with our members in these segments just like we do, I believe in the other segments.”
Five credit union executives mentioned the distrust the Black community feels for the
banking industry. Cloe said, “So, trust is a huge impact, right? Because for generations, those
communities, the underserved communities have been taken advantage of. There’s lack of trust.”
Clem made similar comments, but personalized the comments as a Black credit union executive,
saying, “Building trust and building credibility in the Black community is something that’s so
very important because I think naturally as a culture, as a people, we don’t trust.” Distrust could
seem like a generalization, but Cora tied a lack of trust to outcomes. She noted that the lack of
engagement by Black entrepreneurs with FIs as a partner derives from the outcomes Black
business owners experience. Cora explained, “Part of this, again, is a lot of our members,
especially African American and Black businesses, they have a high rejection rate.” Not every
credit union executive interviewed described the lack of engagement as distrust, but the view that
trust is an issue came through in their comments. Chad said,
I think there’s a connection that needs to be made. In other words, part of the community
commitment is to, for lack of a better word, earn the right to show up in that community,
to show up, put differently, to show up and say, we’d like your business, please become a
member and open your checking account with us. Without having committed to those
communities in other ways seems a little disingenuous.
Three primary subthemes emerged in the interview of these seven credit union executives
(see Table 14). The first subtheme, physical engagement, was about making a personal

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connection with Black business owners. In-person engagement took several forms in the
interviews, not just physically by “being present in the community” (Case), and having “boots on
the ground” (Cloe), but also being personally engaged by employing “faces of our members”
(Cora). There was also a strong agreement among these participants on establishing meaningful
relationships. Cora described it like this, “really stay engaged with our members” and not just
engage but elevate the relationships by “consulting with them one-on-one.” Rounding out the
subthemes was the need to act with sincere intentions as described by Clem, “You have to be
sincere with your intentions and be approachable.”

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Table 14
Credit Union Executives’ View on Personal Business Banking Relationships
Name Theme Participant comments
Case PE; ER “And so I think being there, being present in the community is one step
towards understanding the needs … It’s how do we have a meaningful
relationship with our members in these segments just like we do, I
believe, in the other segments.”
Cloe PE; SI “There’s lack of representation in the bank branches and people that they
are working with and talking to. And so the more that we’re out there
boots on the ground, that we’re working with people that are working
with the folks on the ground, or like you said, if somebody doesn’t trust
you to do something or if you can’t walk the talk, then that trust is broken
and you don’t get another chance.”
Clem PE; SI “But the way that I’ve gotten tapped into the market is you just have to be
in it. You have to be in the market, and you have to be sincere. You have
to be sincere with your intentions and be approachable.”
Cora PE; ER “We have to be in the faces of our members, and when they stop by our
table, we’re able to again, learn a little bit about their business and give
as many nuggets as we can … So it’s a lot that we do at CU3 to really
stay engaged with our members. But I think the way that I learn the most
from them is just by consulting with them one-on-one.”
Chad PE; ER “Well literally a physical example of how we’re trying to better serve those
communities with a physical presence … [as] an organization is to more
tightly connect those and not have them be discreet activities that to some
extent harken back to how we all used to do business.”
Chip ER “You have to think about the fact that we even used the term of relationship
banking. How much of banking has always been built on relationships?”
… if you looked at a lot of who they were banking, they were banking
those they had relationships with. So, you’re in a place where, what? Do
you know those other groups that you were not in relationships with?”
Cato ER “Because of the communities that we’re in and who we serve, most of our
business lending members were members of CU5. And, so, we they
already know us. And now they’ve started a business, and they’re coming
to us to assist them.”
Note. PE = physical engagement; ER = establish personal relationships;
SI = sincere intentions

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Moving the engagement between credit unions and Black entrepreneurs from being
transactional to relationship-based emerged as something credit unions should do from the
interviews with both panels. In-person engagement fosters trust, allows credit unions to better
serve their Black business owner members, and improves outcomes for Black entrepreneurs
starting and scaling businesses. The high level of convergence amongst the Black entrepreneurs
and credit union executives interviewed shows how important personal banking relationships are
to both groups. As previously discussed, there are internal and regulatory challenges that face
credit unions as they think about providing banking services to Black business owners. Credit
readiness, education, and building personal relationships can all help break down some of these
barriers, but it ultimately comes down to credit unions pressing through these roadblocks and
acting with purpose-driven intentionality.
Purpose-Driven Intentionality
Purpose-driven intentionality, in the context of this study, is building a vision that is
committed to working past regulatory and internal challenges to provide services to Black
entrepreneurs and then creating programs to fulfill that vision. All credit union executives who
participated in the study pointed to purpose-driven intentionality as a way to make sure they
better serve their Black business-owning members (see Table 13). Intentionality could take
different forms, but the intent is to answer the following questions. What should credit unions do
to support Black entrepreneurs starting and scaling employer businesses, and what actions should
credit unions take to overcome the internal and regulatory impediments that might prevent them
from succeeding in delivering outcomes for Black business owners seeking banking services?
The participants described intentionality in a variety of ways. Case described it as vertical
alignment across the credit union, saying, “I think in order to be successful in this space, you

97
really have to be intentional, and you really have to have all the way top-down support.” Case
said this commitment means the credit union does not act like a for-profit FI and has to look
through internal performance commitments, “For a profit [oriented] institution, it’s a non-starter.
In a not-for-profit institution, this purpose space like ours, you still have to get comfortable that
there’s going to be even a bigger subsidy than you already have.” Case continued by talking
about being purpose-aligned, “Well, I think it is about purpose. It is about purpose.” Then
stressed it is not just having a verbal commitment, saying, “I think the commitment is only kind
of rhetorical. It’s only verbal … when the implications come, it costs more. You have to have
harder subsidies than you would otherwise. That’s where the [verbal] commitment falls apart.”
The concept of purpose-driven intentionality extends to the expectations of the industry,
not just an individual credit union’s purpose. Credit unions are held to a higher standard. For
example, all banks are encouraged to meet the credit needs of communities in which they do
business (Community Reinvestment Act [CRA], 1977), but there is a general expectation that
credit unions do business this way, even though the act does not apply to them. Cole put it this
way,
But I think that’s the key thing is it’s purpose-aligned for credit unions and CU1. And
just that from almost a duty as an FI, just like CRA-ish, we’re not bound by that. But you
start thinking about it in those terms, then we need to invest in the community in that
way.
Cloe’s comments agreed with the view that being purpose-driven is bigger than a credit union’s
vision. Cloe described it as a key tenant of the cooperative movement.
We weren’t established to help just the average person or the person that could get
financing anywhere. We were established to help somebody that needed tools for work or

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needed a solution to something where they couldn’t get it out on the open market. And so
just being intentional, going back to our grassroots is something that we embraced.
The credit union cooperative movement comes with expectations and privileges. All credit
unions are operating under special not-for-profit tax status, and the tax benefits come with an
expectation (MyCreditUnion.gov, n.d.). Chip stressed this point, saying, “Every politician, every
senator, every president, everyone that I talk to openly say the same thing. Chip, we support
credit unions because credit unions help the people that the banks won’t help.” However,
purpose-driven intentionality is not just about an obligation to the industry.
Credit unions are purpose-oriented by their nature, and seek to engage all of their
members with this sense of purpose. Cato said this about their purpose, “We are very, very true
to our understanding of what, why, why, we’re here, who we serve.” Even though Cato’s credit
union is a specially designated low-income credit union, he said it goes beyond the designation,
“We’re a low-income designated credit union, as designated by the government. And we really, I
think, continued to have this idea of like, Hey, there’s an opportunity. Let’s raise our hand.”
Nearly every credit union executive spoke passionately about their purpose, individually and as a
credit union, and it showed up in their actions.
Turning purpose into action means delivering on purpose and acting in ways that align
with the mission. Cris said they constantly ask themselves, “Do I have Black relationship
managers? Do I have Black underwriters? Do I have, are they seeing people on our leadership
team that represent their community?” Cris continued by saying, “So, we’ve tried to be
intentional about that just overall.” When it comes to putting purpose into action, Cora described
a unique approach to intentionality, saying, “I will say something else that we do intentionally is
we try to where we can, we also try to help that member become vendors.” Providing a specific

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example, she said, “So, I had a member who received a microloan, she has a catering company,
so I started using her services [at the credit union].” Purpose-driven intentionality is not just
member-facing actions; Clem stressed the need to be purposeful in every action, including the
way the credit union thinks about profits:
Not-for-profit does mean not-for-profit … [but] it doesn’t mean no profit, and we have to
earn some profit in order to continue to give back to our members, right? Right. To be
able to do all the wonderful things that we do. But the key is to make sure that we’re
good stewards over the finances, over the profits that we do earn, and to be as efficient as
we possibly can so that we can continue to do more.
Purpose-driven intentionality also means being true to industry expectations, the
foundations of the cooporative movement, and the credit union’s mission. It shows up in the way
credit unions treat their members and how they take care of their finances. It also shows up in
outcomes. Chad said it like this, “I think the clearer recognition that when we talk about … our
purpose, we talk about [ways] to improve the financial wellbeing of our members in their
communities. So, [it includes] the financial wellbeing of their communities.” Chip saw it as a
long-term commitment as well. He noted that credit unions must be on the journey with Black
entrepreneurs, not just making a loan, by saying, “We intentionally try to be more that [a lending
bank] because I’m trying to take a longer-term view to say that it’s more than just giving
someone a loan.”
Purpose-driven intentionality showed up in a variety of ways in the interviews, but every
Panel 2 participant called out the importance of purpose and acting with intention as something
that credit unions should do to support Black entrepreneurs starting and scaling employer
businesses. While intentionality can start from a number of sources, it requires vertical alignment

100
from the board to the individual contributor. It shows up in the credit unions’ public and internal
actions. As suggested by the Panel 2 participants, it is the enabling engine credit unions can use
to help Black entrepreneurs overcome the roadblocks that impede Black business owners when
they are starting and scaling BOFs.
Summary
This chapter presented the findings that surfaced from the semi-structured interviews
with five Black entrepreneurs (Panel 1) and nine credit union business banking executives (Panel
2). The interviews explored the lived experiences of the participants to answer the study’s
research questions. The interviews with Panel 1 participants exploring best practices Black
business owners can use to navigate the U.S. financial system yielded three findings: (a) prepare
yourself financially, (b) have a plan, and (c) persevere. Next, interviewing Panel 2 participants
about what affects credit unions’ ability to better serve Black entrepreneurs, also led to three
findings: (a) regulatory limitations, (b) internal barriers, and (c) a lack of understanding what
Black entrepreneurs need. Lastly, the combined interviews with Panel 1 and Panel 2 informed
the findings about what credit unions could do to better support Black entrepreneurs as they start
and scale BOFs. Four themes emerged from the data: (a) credit readiness, (b) business finance
and credit education, (c) personal banking relationships, and (d) purpose-driven intentionality.
Collectively, the findings that surfaced from the interviews revealed insight into the role credit
unions could play in addressing the inequities Black entrepreneurs face in seeking the financial
services they need to start and grow businesses and provide a pathway to greater economic
equity.

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Chapter Five: Discussion and Recommendations for Practice
The racial wealth gap between White and Black households in the United States is a
persistent issue. Research indicates the wealth gap has not significantly improved over the past
70 years. (Derenoncourt et al., 2022). Even though lawmakers and regulators have attempted to
address the legacy of racism in the U.S. financial system, Black households still suffer inequities
across most critical economic measures (Aladangady & Forde, 2021; FED, 2022; FDIC, 2020).
Research suggests that Black entrepreneurism and the increased success of BOFs could be a
pathway to closing the racial wealth gap.
Data indicate that business ownership is a key factor that drives wealth accumulation in
the United States (Bhutta et al., 2020; FED, 2021). The average net worth of business owners in
the United States in 2019 was 3.3 to 8.8 times more than non-business owners (Bhutta et al.,
2020; FED, 2021), which is promising if the same results materialize for Black entrepreneurs
who successfully start and grow businesses. Research supports the view that business ownership
could provide a pathway to building personal and broad-based wealth for Black communities
(Greenberg, 2017; Holguin et al., 2022). At the same time, the inequities in the U.S. financial
system that Black households face also affect Black entrepreneurs on their business ownership
journey.
The inequities in the U.S. banking system that create roadblocks for Black entrepreneurs
drive the underrepresentation of BOFs in the United States. Many early-stage BOFs have unmet
financial capital needs (Fairlie et al., 2022; U.S. Census Bureau, 2022) and have difficulty
obtaining capital (Baboolall & Fitzhugh, 2021). BOFs were more likely than any other group to
be denied business loans (U.S. Census Bureau, 2022), and this can have a compounding effect on
Black-owned businesses facing other credit challenges (Fairlie et al., 2022). This study explored

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the role credit unions could play in addressing the inequities Black entrepreneurs face as they
start and grow their businesses through the following research questions.
1. What best practices do successful Black business owners have to share with other
entrepreneurs about navigating the U.S. financial system while starting a small
business?
2. What affects credit unions’ ability to design and offer the banking and lending
services Black entrepreneurs need?
3. What should credit unions do to support Black entrepreneurs starting and scaling
employer businesses?
This chapter begins with a discussion of how the findings in chapter four tie to research
and Bronfenbrenner’s (1977, 1979, 1993) ecological systems theory (EST). Next, the chapter
suggests recommendations for practice by credit unions providing business banking services to
Black entrepreneurs. The chapter also provides an overview of the study’s limitations and
delimitations, as well as recommendations for future research. The chapter ends with a summary
of the research and a call to action.
Black Entrepreneurs Journey Through the Lens of Bronfenbrenner’s EST
Some clear themes emerged by examining the study’s findings through the lens of
Bronfenbrenner’s EST, ranging from the impact of a Black business owner’s immediate
surroundings to the influence of broad societal structures. These systems influence the ability of
Black entrepreneurs to engage in the U.S. financial system and for credit unions to support their
financial needs to start and scale their businesses. All five Black entrepreneur study participants
received support, advice, or motivation from groups in their microsystems. The participants
shared a common view that starting with good credit and savings was critical to how others in

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the nested ecological system would treat them and their business aspirations. They described the
relationships with FIs, which sit in the exosystem of Black entrepreneurs’ ecological system, as
transactional or nonexistent. While there was certainly evidence of systemic bias in the banking
experiences the participants described, there were also mixed feelings about if they experienced
systemic bias in their journey. The following sections relate the literature reviewed in Chapter
Two with the findings from interviews specific to the influences experienced by Black
entrepreneurs at the micro-, meso-, exo-, and macrosystem of Bronfenbrenner’s (1977, 1979,
1993) EST (depicted in Figure 3, Chapter Two).
Microsystem Influences
All five participants interviewed experienced influences from individuals at the
Microsystem. The common thread was the importance of having someone they trusted to be
there to supply advice, education, and support. The participants described these close and
influential relationships as family, community, and friends (see Table 15). While each participant
had different relationships, they all spoke about the importance of these close relationships to
their personal journey and success in starting and scaling a small business. The importance of
these close relationships aligns with research that shows a higher rate of successful
entrepreneurism among groups who have and leverage social capital derived from family,
available community education resources, and friends (Fratoe, 1988; Jackson, 2021).

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Table 15
Panel 1 Participants Influenced by Close Relationships
Participant Family Community Friends
Ella
Ezra
Ethan
Emily
Evan
Family can play an integral role in planning or launching a new business (Fratoe, 1988;
Jackson, 2021). Four of the participants mentioned their family’s influence in preparation for
launching their business or as the motivation for starting their entrepreneurial journey in the first
place. The influence and support of family was particularly important for Ella and Ezra. Ella
credited her family for helping her get her business started when the banks turned her down for a
loan, saying, “So, then it’s like I had to turn to my family to borrow from my family. … So, my
family became my lenders in a sense.” For Ezra, his family support was less about direct
financial engagement and more about advice and encouragement. Ezra noted that he came from a
family of entrepreneurs saying, “Yeah, I have some of my cousins, they run some [businesses],
it’s good when you take advice from somebody that knows.” He explained that his uncle, who
owns several businesses, encouraged him to expand beyond a single business, saying, “He have
two, three business and even now he tell me, you have to go for next one because when you have
two source of income, it’s better than only one.” Family is not the only close set of relationships
that can influence an entrepreneur, community can be a supporting and motivating factor also
(Fortunato & Alter, 2015; Jackson, 2021).

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Close relationships with the community in the microsystem can be a supporting and
motivating factor (Fortunato & Alter, 2015; Jackson, 2021). Three of the participants specifically
stated or described the community as an influence in their business journey. Ella noted her
motivation to start the business came from the close-knit relationships in her community. As a
lawyer focused on equitable services and immigration, her motivation came from her
experiences growing up. Ella said,
I kind of grew up in the school system, the public school system, going to school, and
then just seeing how other people were being treated as an immigrant in this country. It
was so unfair. So that made me wanted [sic] to do something about it. So, I wanted to go
to [law] school, so I was like, what am I going to do?
Emily’s community experience was a little less traditional. She talked about the community that
came together to help her secure her multi-family unit loan. Anchored by her relationship with
her realtor, she describes it this way, “The realtor, he is like, oh, I know the lender. And then he
said, okay, I know the lender, he knows the appraiser, and I know the lawyer. I’m like, yeah,
yeah, let’s do that, let’s do that.” Community can also be a source of learning (Fortunato & Alter,
2015), as was the case with Evan. Evan’s community experience came early in his life in the
form of a Boy Scouts troop. The influence gave him the tools he used as a young man to start
preparing himself for a successful financial future. He noted that he had forgotten about his
experience in the scouts until reminded by a friend when he was in his early 20s. He shared the
conversation like this, “[friend speaking] ‘Did you take the personal or finance personal
management badge?’ I said, yeah. He says, ‘you got the answers already. You just have to figure
out how to put ‘em into practice.’”

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Friends, also in their immediate surroundings of the microsystem, were the third element
participants noted as an important part of the business-building journey. Four participants talked
about the importance of these close relationships. Evan’s friend, who reminded him of the
education he got while in the Scouts, also shared the importance of savings. Evan said the advice
was why he was able to be financially prepared later in life.
The first real finance education I had was listening to this fella who just took the time to
say, whether you’re working at a carwash, or whether you own the carwash, or whether
you own 20 car washes, you need to manage your money and understand what’s coming
in, what’s going out. (Evan)
Ethan’s friends were more than mentors; they played a direct role in the business by becoming
credit partners. Ethan noted that including his friends in the business allowed him to move some
of his assets and debts off his personal books and into his business books, saying, “Yes, I was
able to [convert personal debt to business debt], along with the two partners. … I was able to
work with the banks to actually get two of the cars switched over into my business name.” Ezra
was more philosophical about how friends play a role in the success of businesses and stressed
that in underserved communities, friends help one another. He said, “Migrant people from, for
example, from India, they help each other,” his point being that they act as a community as they
start and grow their businesses.
Close connected relationships like family, the community, or friends are important to
entrepreneurs’ journeys, and even more so for those who have faced inequitable access to credit
and the legacy of racism in the U.S. financial system (Jackson, 2021). For the participants in
Panel 1, there were specific examples of where relationships at the microsystem layer affected
the way the individual thought or approached their business. In some cases, there was a direct

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financial impact to the business. In other cases, it was the network effect of these relationships.
The importance of a strong support environment in the microsystem is evident from these
conversations.
Black Entrepreneurs’ Experiences in the Mesosystem
Bronfenbrenner’s EST describes the mesosystem as two or more settings in which the
individual is actively participating that affects the individual or the outcomes they experience
(Bronfenbrenner, 1977, 1979, 1993). The ecological system model (ESM) adapted for this study
of Black entrepreneurs navigating the U.S. financial system while starting and growing a new
business (depicted in Figure 2, Chapter Two) focuses on the interactions between Black business
owners and FIs. Black entrepreneur’s credit and financial condition significantly affect Black
business owners’ interactions at the mesosystem layer. The credit and financial conditions are
closely related to the success or failure that Black entrepreneurs experience as they engage FIs
seeking funding to start and scale their BOFs (Baboolall & Fitzhugh, 2021; Kroeger & Wright,
2021). Specifically, the research noted that inequities and credit issues that Black households
face carry over to individuals’ experiences as entrepreneurs as they engage FIs. All five Panel 1
participants noted sufficient personal savings and good credit are the keys to a successful
business and were critical for them to navigate the financial system in the United States. Ethan,
who had savings and was financially stable, felt credit was the most important impact, saying, “If
you have good personal credit, there is a lot of opportunity.” He continued by saying, “In this
country, credit is your golden ticket. So, if you have good credit, then there’s a lot of business
funding available.” Emily similarly believed savings and good credit combined to help her
secure her business loan, saying, “Yeah, I think the process is easier because I had the good
credit, but I also had with excellent credit and with the saving.” Evan also thought his personal

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financial situation simplified the process as he started his business, saying, “I had no trouble
getting a loan. I had a very good credit score, I had capital to invest, and the SBA loan was more
of a worst-case reserve just in case the sky falls.” Not all the participants had strong credit and
savings, however, Ella shared the impact of poor credit, saying,
At one point, it was that my credit was not high enough, even though I can prove that I
have the revenues in the account, receipt, and I have all this stuff that it was like, again,
now it’s my credit [that is preventing me from getting a loan].
Panel 1 participants’ experiences align with research showing that individual credit and financial
condition, in the form of savings, are critical factors influencing how financial services firms
treat entrepreneurs as they start and scale their businesses (Baboolall & Fitzhugh, 2021; Kroeger
& Wright, 2021). For Black entrepreneurs, who face significant roadblocks navigating the U.S.
financial system, savings is “the main thing” (Ezra), and personal “credit is your golden ticket”
(Ethan).
Black Entrepreneurs’ Relationship With Financial Institutions in the Exosystem
The exosystem consists of those settings, events, or entities that the individual does not
actively engage in but that still impact the individual’s experience or outcomes (Bronfenbrenner,
1977, 1979, 1993). For this study, banks and credit unions supplying business banking and
lending services are the primary entities of interest in the exosystem layer (depicted in Figure 2,
Chapter Two). Research showed that issues securing credit and other banking services result in a
higher failure rate for Black-owned businesses than for White-owned businesses (Baboolall &
Fitzhugh, 2021; Bates et al., 2022; Kroeger & Wright, 2021). Studies by Baboolall and Fitzhugh
(2021) and Bates et al. (2022) noted that poor credit knowledge and lack of adequate business
plans lead to increased failure rates of Black-owned businesses. Panel 2 participants noted that

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credit, financing, and business planning education for Black entrepreneurs are key services that
FIs could provide. However, all but one of the Panel 1 participants had no significant business
banking relationship beyond a transactional one. The lack of a close relationship with an FI
supplying business banking services is potentially one of the key roadblocks Black entrepreneurs
face as they try to navigate the U.S. financial system. Evan, who started his business when he
was financially stable, creditworthy, and had capital to invest, said this about his banking
relationship, “Bank of America could care less if I move those accounts someplace else, they
would never miss me, and they could care less whether I came in the door or not.” Ella also
described her banking relationship as transactional, and it means she is choosing to forgo the
capital she could get if she built that personal relationship. The difficulty of engaging without a
personal relationship with a bank is apparent from the experiences shared by Panel 1. It can
prevent BOFs from trying to establish a lending relationship or establishing a trust-based
relationship where FIs can provide business planning and credit support.
How Systemic Bias at Macrosystem Impacts Black Entrepreneurs
Inequities in the legal, regulatory, or financial system are the primary factors affecting
Black entrepreneurs in the study’s adapted ESM for Black entrepreneurs (depicted in Figure 2,
Chapter Two). The inequities in the U.S. banking system have roots in the systemic racism
embedded in the broader U.S. financial system (Baboolall & Fitzhugh, 2021; Kroeger & Wright,
2021; Wiersch & Misera, 2022). Research shows that the same inequities that affect Black
households also create roadblocks for Black entrepreneurs when they seek banking services and
credit to support their businesses’ needs (Holguin et al., 2022; Perry & Romer, 2020; U.S.
Census Bureau, 2022; Wiersch & Misera, 2022). These inequities in the banking system show up
in the Microsystem of the EST model for Black entrepreneurs on their business journey. While

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research shows financing and credit-seeking outcomes for Black entrepreneurs’ lag White
entrepreneurs, the participants in Panel 1 gave mixed feedback on the impact racism had on their
banking experience (see Table 16).
Table 16
Participant Views and Experience with Racism in Banking
Participant View and
experience *
Comments about racism in the banking industry
Ella R/E “I do think that does play. And then when you’re living in the
urban area, that does kind of play a part in it as well.”
Ezra N/E “I hear we say that, but I don’t think so. I don’t think so. I don’t
think so. No. No, because it’s like if you want to buy a car,
they look at your credit. If you want to buy a house, they look
at your income. It’s the same thing. If you want to get loan,
they look about so many stuff.”
Ethan N/D “I don’t think I’ve experienced it. Everything is done over a
computer of numbers, so I haven’t really gone into a bank for
any funding.”
Emily U/E “I mean during the process I did feel that because some
documentation is not really needed but they were asked for it
and then what else? I mean, I don’t know. I don’t want to say
it’s discrimination because it’s my, I’m not really fully
understanding of the process of getting the loan.”
Evan R/D “And I saw lots and lots of people, lots and lots of races, but it
was generally a certain social economic class of people that
couldn’t really escape the pull from that gravitational pull
from what they did when they were 17.”
Note. R = believes racism impacts banking; N = believes racism does not impact banking; U =
unsure if racism impacts banking; E = experienced inequities banking; D = did not experience
inequities in banking

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Both Ella and Evan felt racism played a role in how banks treated entrepreneurs and
believed inequitable treatment might extend beyond race. Evan felt inequities extended to those
with lower socioeconomic status. Similarly, Ella thought the inequities were broader than her
experience of not securing credit; she noted that racism was something she saw affecting
immigrants and persons of color broadly in urban areas. Both Ezra and Emily had some
difficulty getting their loans, with Ezra receiving less than he initially requested and Emily
required to provide extensive documentation. They both pointed toward banking rules as the
reason for the challenges they faced. Ezra did not think racism played a role at all, and Emily
was unsure whether it was a factor.
Summarizing Black Entrepreneurs’ Journey Through the Adapted ESM
Evaluating the study’s findings in the context of the Bronfenbrenner’s ESM adapted for
this study (depicted in Figure 2, Chapter Two) reveals several overarching themes. First, close
supportive relationships at the microsystem positively affect Black entrepreneurs’ success when
starting and scaling a business. Second, the ease of interactions between Black business owners
and FIs at the mesosystem can be positively or negatively influenced by the individual’s credit
and financial condition. Third, outcomes improve when Black entrepreneurs build personal
relationships with their FIs. The findings from interviews with Black entrepreneurs in this study,
however, showed that the relationships between Black business owners and FIs tend to be
transactional, leaving them stuck in the exosystem. Lastly, at the macrosystem layer, the
literature points out that systemic racism that affects Black households at the individual level
also impacts Black entrepreneurs, but the findings from the study indicate that individuals
experience the impact in different ways.

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Recommendations for Practice
This section presents three recommendations for practice that credit unions could
implement to fulfill the unmet needs of Black entrepreneurs as they start and grow their
businesses. The findings outlined in Chapter Four, the literature reviewed in Chapter Two, and
the discussion of influences on Black entrepreneurs across the adapted Bronfenbrenner ESM in
this chapter form the basis for these recommendations. The three recommendations for practice
are: (a) establish personal banking relationships, (b) deliver business and credit readiness
education, and (c) act with purpose-driven intentionality. Table 17 shows how the
recommendations seek to meet the needs identified in the findings from RQ1, address the
limitations identified in RQ2, and activate the findings from RQ3.
Table 17
Recommendations Relationship to Findings
Recommendation RQ1
Meet the needs
RQ2
Overcome limitations
RQ3
Activate
Establish personal
banking
relationships.
Persevere Understanding needs Personal banking
relationship
Deliver business and
credit readiness
education.
Prepare financially;
have a plan
Credit readiness;
business finance and
credit education
Act with purposedriven
intentionality.
Regulatory
limitations; internal
barriers

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Recommendation 1: Establish Personal Banking Relationships
Credit unions who want to better serve Black entrepreneurs should start by seeking ways
to make lending and financial services less transactional by establishing personal banking
relationships with Black business owners. The literature reviewed in Chapter Two suggests that
poor access to capital is one of the largest impediments Black entrepreneurs face as they start and
grow their businesses (Holguin et al., 2022; Perry et al., 2021). Evidence also pointed to how
inequities in the banking system that negatively affect Black households also create roadblocks
for Black entrepreneurs (Baboolall & Fitzhugh, 2021; Kroeger & Wright, 2021). Despite the
inequities and roadblocks, Black business owners who leverage close supportive relationships
show a higher rate of success than those who do not (Fratoe, 1988; Jackson, 2021). Credit unions
would be ideal FIs to engage Black entrepreneurs due to their community focus. A personal
banking relationship between credit unions and Black entrepreneurs could open opportunities for
business owners who might not otherwise receive financing and would also provide business
mentoring to help better utilize the financing. This personal relationship could improve the
outcomes experienced by Black entrepreneurs as they start and grow their businesses.
For credit unions to build personal banking relationships with Black business owners,
they must overcome three challenges that showed up in the findings of the study. Credit union
executives (Panel 2 participants) interviewed for this study suggested the gaps in their ability to
help Black business owners as they start and grow their businesses were rooted in a lack of a full
understanding of Black entrepreneurs’ banking needs, a history of mistrust between the Black
community and banks, and an elongated process to help Black entrepreneurs secure credit. The
interviews with Panel 2 participants suggested that having a meaningful presence in the
community is a pathway to closing these gaps.

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According to the credit union executives interviewed, a presence in the community goes
beyond opening branches or neighborhood financial centers in Black communities. The
executives suggested a meaningful presence included building partnerships in the community to
deliver services like education and business support. Panel 2 participants also suggested hiring
people who are relatable and come from the community as an important step in building trust and
a more meaningful relationship. The executives pointed out the importance of having a physical
space, creating a network of service providers, and becoming partners with the businesses in the
community. The credit union executives suggested that being present in the community is a step
toward building trust and creating personal business banking relationships. By having a
meaningful presence in Black communities and establishing personal banking relationships with
businesses in these communities, Credit unions would be working to move from the exosystem,
(depicted in Chapter Two, Figure 3), where they are incidental to the Black entrepreneurs’
business journey, to the microsystem, where they are integral in the development and success of
the Black business owner’s journey.
Forming these close relationships and establishing a presence in the local community is
not foreign to credit unions. The early success of the credit union movement came from the close
relationship they had with their members and the local community (McKillop & Wilson, 2011).
Despite this history and evidence that suggests a personal business banking relationship could
improve outcomes for Black entrepreneurs, Black business owners (Panel 1 participants)
interviewed in this study indicated that their relationships with FIs were transactional at best.
Even though Panel 1 participants described their relationships as nonexistent or transactional,
they felt a close personal banking relationship with their FIs would be ideal. The impersonal
nature of the relationships between Black business owners and FIs keeps the relationships and

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influence of the entrepreneur’s experience distant. If a credit union could establish close personal
business banking relationships with Black entrepreneurs, they could shift their engagement with
Black businesses from transactional and distant to personal and high impact.
The lack of personal relationships between Black entrepreneurs and FIs was a gap
identified by both Panel 1 and Panel 2 participants. Evidence indicates that entrepreneurs who
leverage personal relationships in the exosystem experience better outcomes (Fratoe, 1988;
Jackson, 2021). The roadblocks like lack of access to credit, inequities that affect entrepreneurs’
personal credit, and sparse business execution support which worsen outcomes (Baboolall &
Fitzhugh, 2021; Holguin et al., 2022; Kroeger & Wright, 2021; Perry et al., 2021) would be
addressable by credit unions if they had a personal banking relationships with Black
entrepreneurs. Credit unions that want to better serve Black entrepreneurs should start by
establishing personal banking relationships with Black business owners. These close personal
banking relationships would also position credit unions to deliver business credit education and
credit readiness education.
Recommendation 2: Deliver Business and Credit Readiness Education
Once credit unions establish personal banking relationships with Black entrepreneurs by
integrating themselves into the community, they would be well-positioned to deliver critical
business and credit readiness education to Black business owners. While much of the literature
agrees that access to credit is one of the most significant roadblocks facing Black entrepreneurs,
Baboolall and Fitzhugh (2021) suggested that FIs should also seek to deliver business and credit
education. The authors noted that Black businesses need help identifying alternative methods of
applying for loans and borrowing know-how to help overcome the barriers that impact the
success of Black entrepreneurs as they start and grow their businesses. Bates et al. (2022) noted

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that one of the significant factors affecting Black entrepreneurs’ success even after they secure
financing is the lack of expertise needed to effectively utilize the financing. The need for
business and credit readiness knowledge is an ongoing need for Black entrepreneurs on their
business-building journey, and credit unions who want to engage their Black business-owning
members more effectively should seek to deliver this education to close this gap.
The findings from interviews with Black entrepreneurs (Panel 1) in this study support the
need for business and credit readiness education. Panel 1 participants noted financial preparation
was important to the success of Black business owners; every Panel 1 participant expressed
frustration with securing credit, and more than half of these participants agreed that there was a
need to establish clear, executable business plans. Though the participants in Panel 1 were
successful in starting and growing their businesses, all but one of them expressed a need for
education that supported borrowing know-how, financial literacy, and business money
management. The literature and findings from the Panel 1 interviews support the need for
business and credit readiness education as a critical service. Credit unions, once they established
personal banking relationships and a presence in the community, could uniquely deliver these
services.
The credit union executives interviewed for this study identified credit readiness and
business education services as key initiatives that credit unions could offer to improve outcomes
for Black entrepreneurs as they start and grow their businesses. The participants in Panel 2 noted
the elongated process to secure funding would benefit from additional support from the credit
union, and engagement at this level helps to strengthen the personal banking relationships they
are trying to maintain. According to the findings from Panel 2 interviews, establishing personal
banking relationships and delivering business and credit readiness work hand-in-hand. Credit

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union-provided business and credit readiness education not only helps close the knowledge gap
identified in the literature and through the interviews of both panels, but it also creates an
opportunity for credit unions to prepare Black business owners to take advantage of specialpurpose lending products.
Special-purpose lending products, as discussed in Chapter Four, are banking products
that credit unions can use to provide loans to entrepreneurs who are from historically
marginalized populations without impacting their business lending cap. The Aggregate MBL
Limit (2019) placed on credit unions says business loans cannot exceed 1.75 times the credit
union’s total assets, but special-purpose loans are not counted in this cap. However, credit union
executives in the Panel 2 interviews said many Black entrepreneurs could not take advantage of
these programs because of a lack of knowledge and credit readiness. Education programs for
Black business owners preparing them to be credit-ready, aware of available financing products,
secure special-purpose loans, and use them most effectively aligns with the findings from Panel
2 interviews.
Delivering business and credit readiness education is synergistic with the first
recommendation, establishing personal banking relationships. The recommendation aligns with
the needs Black entrepreneurs identified in the interviews conducted for this study. Credit union
executives interviewed for this study also identified credit readiness and business finance
knowledge as gaps experienced by the Black business owners they engage. According to the
literature, credit-readiness, financing, and business planning knowledge gaps contributed to
negative outcomes experienced by many Black entrepreneurs as they start and grow their
businesses (Baboolall & Fitzhugh, 2021; Bates et al., 2022). Delivering business and credit

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readiness education is a promising pathway to closing this knowledge gap, according to the
findings from interviews with both panels.
Recommendation 3: Act With Purpose-Driven Intentionality
Credit unions that act with purpose-driven intentionality build vision-based plans
committed to working past regulatory and internal challenges and then make daily decisions in
context of that vision. Specific to this study, the recommendation is for credit unions to consider
their vision to better serve their Black business-owning members when they develop their
product strategy, perform operational activities, and develop financial plans. Purpose-driven
intentionality is a mindset that the credit union would operate with a greater purpose and seek
ways to overcome internal and external limitations so they are well-positioned to lean into the
expense of building personal banking relationships and establishing business and credit-readiness
education programs.
Regulatory and internal limitations can be an impediment to acting with purpose-driven
intentionality. Regulations placed on credit unions limit to whom and how much credit unions
can lend to businesses (National Association of Federally-Insured Credit Unions, 2022;
Aggregate MBL Limit, 2019). Profitability and risk-driven decisions lead to credit unions’ overindexing on commercial real estate (Ritter, 2020), which limits credit unions’ ability to be more
assertive about supporting Black entrepreneurs especially early in their business building
journey. Credit union executives interviewed identified both regulatory and internal limitations
that negatively affect their ability to serve Black business members. The concerns ranged from
the general regulatory limitations like Aggregate MBL Limit (2019) and the field of membership
constraints to specific internal constraints like profitability and risk.

119
Credit unions are not-for-profit FIs that receive certain tax benefits with the intent to
promote the well-being of their members (MyCreditUnion.gov, n.d.). Acting with purposedriven intentionality aligns with the credit union mandate. Credit union executives interviewed
for this study agreed that purpose was a significant motivator for why the credit unions exist and
shared that being purposeful and values-driven was important to serving out their mission.
Further, every Panel 2 participant agreed that purpose and acting with intentionality with respect
to mission and values was a behavior that all credit unions should adopt to support Black
entrepreneurs starting and scaling businesses.
Limitations and Delimitations
The limitations of a study are the influences that are typically out of the researcher’s
control that may affect the study’s conclusions (Theofanidis & Fountouki, 2019). The most
significant limitation of this study is its dependence on interview responses. While participants
are volunteers in the process, it does not protect the study from participant exaggeration, lack of
transparency, or an inability to communicate their ideas in terms the researcher understands
(Creswell & Creswell, 2018). Triangulation across participants helps mitigate this limitation, as
does diligence in asking follow-on questions during the interview process. Another potential
limitation is researcher and participant bias, which can affect how questions are asked and
answered (Creswell & Creswell, 2018; Merriam & Tisdell, 2016). Maintaining awareness of my
role as an insider or outsider and monitoring my biases can minimize the impact of this limitation
(Weiss, 1995).
Delimitations are decisions made by the researcher which could limit or strengthen the
study (Theofanidis & Fountouki, 2019). The authors say that delimitations often arise from
selecting study participants and the research questions. One delimitation of this study is the

120
limited number of participants in Panel 1. The participants all come from geographically diverse
locations and span several industries, which serves to mitigate the negative impact of this
delimitation. In practice, there was convergence across several themes despite the limited
number of participants.
Panel 2 consisted of nine participants who come from five different credit unions. This is
still a limited population, but the diversity of each participant’s role, geography, gender, and
ethnic background mitigated some of the potential negative impacts of the choice to limit Panel 2
to nine executives. Like with Panel 1, participants in Panel 2 also converged on key themes.
Neither Panel 1 nor Panel 2 data stands alone in this study.
Combining the two panels is where the study’s strength comes into focus. Interviewing
those trying to access credit and banking services (Panel 1) and those who design and deliver
these services to BOFs (Panel 2) created an opportunity to cross-check trends and understand
inconsistencies. While these are two distinct panels answering different questions, the
convergence around recommendations about how credit unions should support Black
entrepreneurs is evidence that interviewing both Panels was valuable.
Recommendations for Future Research
There are several areas for future research that revealed themselves through the literature
review and findings from the study. The study focused on the actions credit unions could take
within the current regulatory environment. Turning the research toward the policies themselves
could identify actions regulators could take to loosen constraints placed on FIs. Several Panel 2
participants noted regulators were making efforts to improve the regulatory environment, but the
participants fell short of identifying specific programs or regulatory easing that would help credit
unions better support Black entrepreneurs on their business-building journey.

121
Panel 1 participants were all successful Black entrepreneurs. Through the interview
process, it was clear that no barrier would prevent them from achieving their goals. Their focus
was on solving problems, not on why barriers existed in the first place. While their focus was not
on systemic racism in the U.S. financial system, they identified gaps they believe still exist in the
U.S. financial system. The Black entrepreneurs in the study supplied best practice advice for
Black entrepreneurs starting a new business, but further study of successful Black business
owners would provide additional insights into why successful entrepreneurs achieve success
beyond grit and perseverance.
Examining the lived experiences of Black entrepreneurs who were still struggling or did
not succeed in starting and scaling their businesses is another area of potentially interesting
study. It is possible that the systemic racism embedded in the U.S. banking system is more
prominent in the experiences of those entrepreneurs that do not experience the same level of
success as the successful business owners included in Panel 1. Exploring the lived experiences of
Black entrepreneurs who have not yet overcome the barriers in the U.S. financial system might
provide additional insights into the gaps credit unions could address.
Some participants from both panels named community development financial institutions
(CDFI) as a source of support for Black entrepreneurs starting businesses. While credit unions
can be CDFIs, as was the case for several of the credit unions represented in the study, many
CDFIs are local non-profit organizations that are able to provide services like mentoring, board
advisory, and business plan development that a highly regulated credit union would struggle to
provide. Examining non-credit union CDFIs could provide additional insights into the unmet
needs of Black entrepreneurs and possibly identify regulatory easing that would allow credit
unions to play a more meaningful role in the growth of businesses in the Black community.

122
Conclusion
The racial wealth gap between White and Black households in the United States is a
complex and persistent problem. Research indicates the wealth gap is rooted in the legacy of
systemic racism (Baptist, 2016; Baradaran, 2017; Urofsky, 2022). Despite efforts by lawmakers
to address the inequities in the financial system, the racial wealth gap has not significantly
improved in more than 70 years (Derenoncourt et al., 2022). Entrepreneurship could play an
important role in closing the racial wealth gap (Bradford, 2014; Kroeger & Wright, 2021), but
the inequities that face Black households also create roadblocks for Black entrepreneurs as they
start and scale businesses. The roadblocks Black entrepreneurs face are evident in the outcomes
experienced by Black-owned employer firms and their significant underrepresentation (Bates &
Robb, 2015; U.S. Census Bureau, 2022; Wiersch & Misera, 2022).
This study used Bronfenbrenner’s EST (Bronfenbrenner, 1977, 1979, 1993) as a
conceptual framework to explore the financial journeys of Black entrepreneurs as they started
and grew businesses and uncovered the role credit unions could play in addressing the inequities
Black entrepreneurs face on their business-building journey. The findings surfaced from data
collected through semi-structured interviews with two unique populations. Panel 1 consisted of
Black entrepreneurs who have successfully started and grown BOF, and Panel 2 consisted of
credit union executives who lead the delivery of business banking services.
Panel 1 interviews exploring best practices Black business owners could use on their
business-building financial journey yielded three findings: (a) prepare yourself financially, (b)
have a plan, and (c) persevere. Interviews with Panel 2 participants about internal and external
barriers to better serving Black entrepreneurs also led to three findings: (a) regulatory limitations,
(b) internal barriers, and (c) a lack of understanding of what Black entrepreneurs need. Lastly,

123
the interviews across both panels about what credit unions could do to better support Black
entrepreneurs identified three themes: (a) credit readiness, (b) business finance and credit
education, (c) personal banking relationships, and (d) purpose-driven intentionality.
The findings, combined with the literature reviewed and the discussion about Black
entrepreneurs’ Bronfenbrenner ESM influences, formed the basis for three recommended actions
that credit unions should take: (a) establish personal banking relationships, (b) deliver business
and credit readiness education, and (c) act with purpose-driven intentionality. Executing against
these three recommendations, credit unions have the potential to improve outcomes for Black
entrepreneurs starting BOFs.
Increasing the number of successful Black-owned businesses is a promising pathway to
close the racial wealth gap in the United States. This study outlined the pivotal role credit unions
could play in helping Black entrepreneurs overcome financial barriers by delivering tailored
banking services to Black-owned businesses. Credit union initiatives like personalized banking
relationships, comprehensive business and credit readiness education, and purpose-driven
intentionality will improve Black entrepreneurs’ access to financing. These initiatives are a great
start, but more work is necessary. Lawmakers and regulators must prioritize rewriting policies,
so credit unions have more latitude when serving historically marginalized communities.
Government agencies should consider expanding programs that provide financial relief and risk
protection to FIs providing services to historically marginalized communities. Credit unions
should take the corporative movement to the next level and join forces with community action
groups to help Black entrepreneurs on their business-building journey.
The underlying negative impact of the racial wealth gap on the U.S. economy is
significant. As an economic measure, it is easy to treat it as a set of numbers on a page and miss

124
the underlying effects on Black communities, which include food and housing insecurity,
inadequate access to healthcare, and pay inequities. Entrepreneurship and small businesses have
long been a pathway to wealth building in the United States. Unfortunately, the same underlying
systemic racism in the U.S. financial system that affects Black households also presents
roadblocks for Black entrepreneurs. This study found that credit unions can help Black business
owners overcome key challenges they face. Credit unions should move to action with urgency,
not just because it is good for the banking system and the economy, but because it is the right
thing to do.

125
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Appendix A: Interview Protocol Panel 1
Thank you for agreeing to meet with me today. I am grateful for the time you have set
aside to share your experiences starting and growing your business. The interview will last about
one hour. Is this still a convenient time for us to speak?
Before we start, I wanted to give you a little background on my study and answer any
questions you might have about participating. According to the Federal Reserve Bank data, the
racial wealth gap between Black and White households has not improved in the last 70 years.
Research indicates that many factors contribute to the gap. Still, one could summarize them as
roadblocks created by systemic inequities in the U.S. banking and financial system that
negatively affect Black households. While policymakers have tried to address these inequities,
their efforts have proven inadequate. Research also shows that business ownership is a precursor
of wealth creation, but the same inequities that create roadblocks for people of color at an
individual level also impact African American and Black entrepreneurs starting and growing
businesses. This study aims to identify best practices used by successful businesspeople like you
and to identify what additional financial services would promote the successful creation and
growth of Black-owned businesses.
I am the primary researcher for this study and am working with a faculty advisor at USC.
I will interview other entrepreneurs like yourself to identify best practices and additional
financial services that would be helpful when starting and growing a business. I will also
interview executives from several credit unions to determine the challenges they face when
trying to offer the financial services needed by entrepreneurs like yourself. Do you have any
questions about the purpose of the study itself?

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Everything we discuss is confidential. The final paper will aggregate all findings before
reporting. Should I use an actual quote in the study, it will be completely anonymous. Is there a
particular pseudonym you would like to use? If not, I will refer to you as Business Owner (#). No
names will ever be associated with the findings. I will delete the recording from this interview
when the study is complete. I will also scrub the transcripts of individual and company names to
assure privacy. Do you have any questions about the interview?
If you have questions about your rights while participating in this study, or you have
concerns or suggestions, and you want to talk to someone other than me about the study, please
call (323) 442-0114 or email irb@usc.edu. You can reference IRB # (number here).
I would like to record this interview to capture what you share today accurately. Do I
have your permission to record the interview? If at any time you wish to stop recording, we will
do so immediately. Your participation in all aspects of data collection is entirely voluntary. You
may skip questions or end the interview at any time. May I have your permission to start?
Interview Protocol Panel 1
The current time is [mention date and time], and this is an interview of [Entrepreneur /
Credit Union Executive].
First, I would like to start with a little background about your business.
1. How do you define success for your business?
2. How long have you been in business?
3. How long did it take to hire your first employee after you started your business?
4. Does your business have a banking or financial services, or funding relationship?
Now, if it is ok, I would like to hear about your experiences starting and growing your
business.

137
5. Tell me about how you funded your business’s start-up and growth. Why you chose
that path?
6. Can you tell me about any financial challenges you experienced?
• Do you feel like you were prepared for that challenge when it happened? Why
or why not?
• If you think back to when you were facing that challenge, were you confident
you would make your way through it? Why or why not?
• Is there anyone who helped you navigate your way through the challenge?
How did they help?
• What advice would you have for other entrepreneurs as they start their
journey?
7. Thinking about the first time (or early in your business’s journey) that you sought a
banking relationship for your business. Tell me about that experience. Did family,
friends, your community, or customers assist in helping you establish that early
banking relationship?
8. Tell me about your experience as your banking needs expanded.
• Did it get easier? Why or why not?
• How did your relationship with the bank(s) and/or banker(s) change over
time?
• Did you have any mentors or other entrepreneurs to help in this journey?
9. Do you feel like there are systemic inequities in the banking and financial systems of
the United States that you have had to navigate? If you do, then how would you
describe them?

138
10. As you think about a business’s need for banking, lending, and payment processing
services, what advice would you give other entrepreneurs starting their journey?
11. Have you ever considered using a credit union as a financial services partner for your
business? Why or why not? (NOTE: adjust this question if they noted they have a
relationship with a credit union in the recruiting questionnaire or the interview.)
12. Thinking about your business journey and where you are right now, what additional
services would you like to see (for yourself and those that might help new
entrepreneurs) come from your banking relationship?
13. What would it take for you to feel like your financial services relationships were true
partners in helping you succeed in reaching your business goals?
14. Are there any topics you think we should have covered that were missing from the
conversation?
Again, I want to thank you for your time. This interview has been invaluable to my
research. If you think of something we should have covered in the discussion, please feel free to
email me at phutchis@usc.edu. If I discover something interesting or substantially different in
the other interviews, would it be ok if I send you an email with any follow-up questions? Again,
thank you so much for your time. Have a great day, and I wish you continued success.

139
Appendix B: Interview Protocol Panel 2
Thank you for agreeing to meet with me today. I am grateful for the time you have set
aside to share your knowledge about how the credit union industry can help Black entrepreneurs
start and grow employer businesses. The interview will last about one hour. Is this still a
convenient time for us to speak?
Before we start, I wanted to give you a little background on my study and answer any
questions you might have about participating. According to the Federal Reserve Bank data, the
racial wealth gap between Black and White households has not improved in the last 70 years.
Research indicates that many factors contribute to the gap. Still, one could summarize them as
roadblocks created by systemic inequities in the U.S. banking and financial system that
negatively affect Black households. While policymakers have tried to address these inequities,
their efforts have proven inadequate. Research also shows that business ownership is a precursor
of wealth creation, but the same inequities that create roadblocks for people of color at an
individual level also impact Black entrepreneurs starting and growing businesses. This study
aims to identify best practices used by successful BOFs, identify their ongoing needs, understand
the roadblocks preventing credit unions from meeting these needs, and think about how Black
entrepreneurs and credit unions might work together to start and scale more BOFs.
I am the primary researcher for this study and am working with a faculty advisor at USC.
I will be interviewing other credit union executives to identify common roadblocks experienced
by credit unions as they seek to serve the Black business community. Prior to this interview, a
panel of Black entrepreneurs shared their lived experiences with respect to navigating the U.S.
financial system. I will use what I learned in those sessions to guide our brainstorming. Do you
have any questions about the purpose of the study itself?

140
Everything we discuss is confidential. The final paper will aggregate all findings before
reporting. Should I use an actual quote in the study, it will be completely anonymous. Is there a
particular pseudonym you would like to use? If not, I will refer to you as Credit Union Executive
(#). No names will ever be associated with the findings. I will delete the recording from this
interview when the study is complete. I will also scrub the transcripts will of individual and
company names to assure privacy. Do you have any questions about the interview?
If you have questions about your rights while participating in this study, or you have
concerns or suggestions, and you want to talk to someone other than me about the study, please
call (323) 442-0114 or email irb@usc.edu.
I would like to record this interview to capture what you share today accurately. Do I
have your permission to record the interview? If at any time you wish to stop recording, we will
do so immediately. Your participation in all aspects of data collection is entirely voluntary. You
may skip questions or end the interview at any time. May I have your permission to start?
Interview Protocol Panel 2
The current time is [mention date and time], and this is an interview of
[entrepreneur/credit union executive].
First, I would like to talk a little about the credit union itself.
1. Tell me about the credit union’s involvement in the Black community.
2. Think specifically about supporting businesses; tell me about the credit union’s
involvement in providing services to Black entrepreneurs.
3. Thinking about the credit union from the board to the individual contributor, how
would you describe the commitment to supporting Black-owned businesses?

141
If it is ok, I would like to turn our conversation to the challenge you think credit unions
face when trying to support Black-owned businesses.
4. Thinking about the credit union industry and the regulatory bodies monitoring credit
unions, what changes do you think would make it easier for credit unions to support
Black-owned businesses’ financial services needs?
5. Tell me about any financial or organizational restrictions preventing the credit union
from marketing and delivering services to Black entrepreneurs.
• Credit risk?
• Financial targets?
• Charter limitations?
6. Do you think the credit union has a complete understanding of Black-owned
businesses?
• If yes, how did the credit union come to this understanding?
• If not, how do you think the credit union could learn more?
7. Tell me about the credit union’s motivation to partner with Black entrepreneurs as
they start and grow employer businesses.
8. Some of the compiled data from my interviews with Black entrepreneurs show the
following best practices shared among successful businesses (this will be filled out
after interviews with Panel 1).How do you think credit unions could best work with
Black entrepreneurs to help foster and expand these best practices to others?
9. Some of the compiled data from my interviews with Black entrepreneurs show the
following common needs (business and credit education, credit readiness support, and
access to bridge capital). Do you see any challenges in meeting any of these needs?

142
How do you think the credit union could work with Black entrepreneurs to meet these
needs?
10. Tell me how the credit union works in the Black community and with Black
businesses; how would you expand this engagement?
11. Can you think of anything, not already covered, that might help identify challenges
facing the credit union as it tries to support Black-owned businesses?
Again, I want to thank you for your time. This interview has been invaluable to my
research. If you think of something we should have covered in the interview, please feel free to
email me at phutchis@usc.edu. If I discover something interesting or substantially different in
the other discussions, would it be ok to send you an email with any follow-up questions? Would
you be willing to participate in a workshop with other credit union executives to brainstorm
different ideas about serving BOFs?
Again, thank you so much for your time. Have a great day, and I wish you continued
success.

Abstract (if available)

Abstract The racial wealth gap between White and Black households in the United States is a persistent issue that has not significantly improved in the last 70 years. Research shows business ownership is a potential pathway to closing this gap. Unfortunately, the same inequities in the U.S. financial system that negatively affect Black households also create roadblocks for Black entrepreneurs starting and growing businesses. This qualitative study presents an in-depth examination of the challenges faced by Black entrepreneurs and how credit unions could be a positive force in breaking through the systemic inequities that prevent Black-owned businesses from thriving. Using Bronfenbrenner’s ecological systems theory as a framework, the study explores how influences across the layered systems influence the success or failure of Black-owned businesses. The study engaged Black entrepreneurs and credit union executives to explore three key topics: (a) the best practices successful Black business owners used to navigate the U.S. financial system, (b) the factors potentially limiting credit unions’ engagement with Black entrepreneurs, and (c) the services credit unions should offer to address the unmet needs of Black entrepreneurs as they start and scale businesses. The findings from the qualitative data synthesized with relevant prior research formed the basis for three recommended actions that credit unions should take: (a) establish personal banking relationships, (b) deliver business and credit readiness education, and (c) act with purpose-driven intentionality. Executing against these three recommendations, credit unions can potentially improve outcomes for Black entrepreneurs starting BOFs and begin closing the racial wealth gap.

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Asset Metadata

Creator Hutchison, Paul Buren, III (author)

Core Title Entrepreneurship and credit unions: a pathway to economic equity in the United States

Contributor Electronically uploaded by the author (provenance)

School Rossier School of Education

Degree Doctor of Education

Degree Program Organizational Change and Leadership (On Line)

Degree Conferral Date 2024-05

Publication Date 03/25/2024

Defense Date 03/25/2024

Publisher Los Angeles, California (original), University of Southern California (original), University of Southern California. Libraries (digital)

Tag Black entrepreneurship,business banking,credit union,financial inequity,financial services,NCUA,OAI-PMH Harvest,racial wealth gap,small business,systemic racism

Format theses (aat)

Language English

Advisor Krop, Cathy Sloane (committee chair), Kim, Esther C. (committee member), Pritchard, Marcus (committee member)

Creator Email phutchis@usc.edu

Permanent Link (DOI) https://doi.org/10.25549/usctheses-oUC113858331

Unique identifier UC113858331

Identifier etd-HutchisonP-12712.pdf (filename)

Legacy Identifier etd-HutchisonP-12712

Document Type Dissertation

Format theses (aat)

Rights Hutchison, Paul Buren, III

Internet Media Type application/pdf

Type texts

Source 20240327-usctheses-batch-1131 (batch), University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

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